Increasing NHS SuperAnnuation Contributions

5strings

Hi to you all.
I've searched for advice here and generally on the web but have not been able to find anything directly relevant. Maybe some of the knowledgeable posters here could help.
My wife works part-time in admin in the NHS and hopes to return to work full time in the next few years. At the moment she contributes to the NHS Superannuation scheme at the standard rate which is 6% of her gross salary.
My question is this ...
what would the benfits be if she was to increase the 6% contribution to the maximum allowable of 15%? Will each £1 of extra contribution be a better use of her money than putting it to use elsewhere?

YorkshireBoy

Can't give you a specific answer to your question but can tell you what we've done recently.

My wife has 3 part-time jobs with local council, totalling 32hrs/week.

She was paying 5% on No 1 and 6% on No 2. We have increased these by buying extra years so she now pays 15% on each.

She has only just started job No 3 and her letter of appointment says this will be pensioned at 6%. It is our intention to lift these contributions as soon as possible as well, if allowed.

I spoke with the LGPS administrators prior to buying the extra years and they HIGHLY recommended it! The revised benefits package she now has looks very good indeed.

There have been a few posts recently on the board regarding this subject. I think the last time I contributed to someone asking a similar question was back in February - you could try a search?

I "know" it was the right thing to do for us, but someone like dunstonh may be along shortly to tell you the technical reasons as to "WHY" it is a good thing do.

HTH
YB

dunstonh

I "know" it was the right thing to do for us, but someone like dunstonh may be along shortly to tell you the technical reasons as to "WHY" it is a good thing do.

As if by magic....

AVCs are generally considered poor value now. Unless the scheme has some enhancement to them. The lack of flexibility can be a bind come retirement. I have dealt with a number of clients recently who regret taking AVCs out and would have gone with a stakeholder/PPP had it been available or an ISA.

Extra years can cost more on face value but can provide the highest income per pound paid.

Stakeholder/personal pensions if eligible (under 30k p.a. earnings) can be a lower cost option but will most likely produce less than added years but can be more beneficial if phased or gradual retirement is likely.

As mentioned above by YB, there have been some good threads on similar subjects over the last few weeks which you could look up.

Thats my last post until the weekend as I am off to Rome in the morning. Catch you all next week and don't let Deemy get away with his pension bashing too much

5strings

YorkshireBoy..
thanks for your reply.
I agree that it sounds like it should be the right thing to do as NHS + Civil Service schemes tend to be more favourable than in the private sector.
When you say "buying extra years" do you mean that any years before this one could be bought by handing over a lump sum effectively offering the difference between the 6% she has been paying so far thereby marking them up to 15% -- as if she had been contributing at 15% all the time? Or do you mean only future years can be bought for 15% ?
I will go back through this board and look for your post on this.

YorkshireBoy

dunstonh wrote:

Extra years can cost more on face value but can provide the highest income per pound paid.

This was the summary phrase I *now* recall from previous threads. Thanks dunstonh

Quote 5strings...
====================
"When you say "buying extra years" do you mean that any years before this one could be bought by handing over a lump sum effectively offering the difference between the 6% she has been paying so far thereby marking them up to 15% -- as if she had been contributing at 15% all the time? Or do you mean only future years can be bought for 15% ?"
====================

5strings - I've just dug out the wife's pension file but I couldn't accurately put across here what its meant for us, sorry. However, if I can "summarise" a few points...

(Hopefully I can explain this properly - someone please jump in and correct me asap if its wrong.)

I think the most you can pay is 15% of salary. So, if my wife already pays 5%, the scheme administrators calculate how many extra years service she can buy with the extra 10%. So, I think the moral of the story here is the quicker you get in the better!

It should be noted though, that the cost is not "pro-rata" as the employer makes no additional assistance with the purchase of additional years. Therefore the cost may appear excessive for the benefits gained, especially when compared to the 5% benefits enjoyed as standard.

I also recall that once you apply you cannot start until your next birthday - we were lucky as my wife's birthday was only 2 weeks away when we applied

If I can give one piece of advice, it is contact the scheme administrators. They were very useful for us and explained everything clearly (at the time!).

Good Luck
YB

5strings

Thanks YB,
as her next birthday isn't till much later this year, time is on my side to gather as much through the HR department as I can. Any useful info i dig up, i'll post it here.

margaretclare

Hi 5strings

It could be a good move to buy extra years. This means that she can effectively 'buy' the years she didn't work for the NHS. At one time it was possible to draw out one's contributions after 3 years nursing training, and most of us did - a bad move, we weren't warned about it then, and thank goodness it's no longer allowed.

However, what I did was actually to 'buy' back those 3 years, and to buy others when I hadn't been working in the NHS.

I once went to a Royal College of Midwives meeting where the speaker was from the RNPFN (Royal National Pension Fund for Nurses) and he said that our NHS superannuation fund was the best scheme going (at the time) and hang on to it at all costs, don't be tempted to try to access it too early, and pay in extra if possible. I think that advice rolled off a lot of the people there (who may be regretting it now!) but I took it on board.

Best wishes

Margaret