We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Retiring from the NHS
Comments
-
It isn't that popular, it just has vocal supporters who write lots of posts about it.I'm considering Vanguard Lifestyle 80% at the moment, but in all honesty it's because it seems very popular on here.
To start learning about portfolio management and not fall into the "average active fund does less well than the index so picking a passive tracker fund that is guaranteed to always do less well than the index is best" logical fallacy. Which doesn't mean that passive trackers are bad, just that they aren't the perfect answer.All the different funds, providers etc are rather otherwhelming and I don't really know where to start. Would it seem a sensible option for a beginner investor?
Fundology does a nice debunking of the fallacy and was written by a fund manager. Others will recommend books about portfolio construction that are useful, along with the clearly incorrect but still useful efficient markets hypothesis which you should know about, because it does matter - think of it as like the billiard ball model of atoms, not right, but still useful.Any books you could recommend? I'm quite a structured learner and trying to make sense of the vast amount of info on the web is difficult.
Watch out for US studies and books. The UK isn't the US and has different tax laws and investments that can change the answers. The US has particularly onerous tax for active managed funds that the UK does not have - in the US capital gains tax is higher for holdings of less than a year and due to be paid by investors in the year it's incurred on the individual buys and sells within a fund. In the UK it's not higher and no CGT is due until the fund is sold, what happens to holdings within it doesn't matter to an individual's tax position. This is one reason why in the US a study of active funds found that they beat the index on average before tax but not after tax.
I tend to favour a core global growth tracker fund and lots of active managed funds. Don't stick to one type or the other, use whichever is best for the particular job at hand.
I'm particularly uncomfortable with bond tracker funds at the moment, given what is going on in the bond market.0 -
One other thing to bear in mind.
If your DH left the NHS around 2015 then he would have only his pre-2015 pension to draw at 60 plus whatever other arrangements he makes after leaving. This will accrue at CPI so will essentially preserve its value and be added to whatever pension he accrues in a non-NHS scheme or a personal pension etc.
When you get your forecast is that based on paying in the maximum number of years? So if he left in 2015 but didn't draw it until 60 would it be to the value of today's forecast or is that forecast based on working to retirement? (I have a feeling that is a very stupid question, apologies. What I don't know about this stuff is ridiculous. Saying that, it's not my scheme)If he stayed in the NHS for another 13 years and left at 55 he would have his 1995 pension until 2015 plus 13 years in the 2015 scheme. This presents some issues in that he will get his 1995 pension at 60 and his 2015 pension at whatever is his normal retirement age (68?). So if he left at 55 and drew his 1995 pension at 60 it would not include his 2015 Pension unless he wanted to take that part earlier (after substantial actuarial reduction of 40%).
However, if he continued working for the NHS beyond 60 (unlikely from what you say) he would probably not want to take his 1995 pension at 60 unless he went part time, due to a process called abatement.
Yes that makes sense and I understand it, thank you.One other consideration to check (THicko2 may be able to advise) is whether if he were to continue working in the NHS beyond 2015 the "final salary" on which the pre-2015 pension is based is the salary when he leaves the NHS or the salary at 2015. If the former, and your DH has another promotion or two in him, this could increase the value of his accrued pension at 2015 so may be a reason for staying in the NHS?
Yes that could make quite a difference. He is top of band 7, but don't think band 8 is out of the question by any means (not sure how far up it though).0 -
OP not sure what you mean by "ran out". Your earlier post gives the impression you think that there is a pension fund (ie a fixed amount of money), there is not. Its a Defined Benefit Scheme that pays (the 1995 bit) from 60 until he dies (and if you survive him, will give you a smaller pension). The 2015 bit is also a DB scheme and pays out at a different age but also until he dies. So it does not run out.
Thanks, that's a fundamental misunderstanding of mine. My scheme is defined contribution and I hadn't considered it might be different.0 -
Yes it would sem they are confused between defined benefit and defined contribution:
There is no fund, just a promise to pay you based on your ages and final or average salary depending on your scheme.
And you may 'want to retire at 55, but Ic an assure you uless you are very unhealthy 55 is quite young and will be more so when you/he get there. And you don't want a reduction of 40$ of your pension to do so, so you need to save outside the pension.
Yes I was confusing the schemes. I know how my defined contribution scheme works but I don't really get how the DB works (hence my question about whether the forecast now is based on contributions to now, or whether it's based on contributions to retirement).
I recognise 55 is young to retire and it might be when we get there one or the other or both of us don't want to retire. Even if we do, I don't see that as going from working full time to nothing. My aim really is to get us into a position where if we chose to do so we could leave our main jobs and either do voluntary work or maybe part time work that doesn't need to actually pay the bills. Husband likes his job, just not all the red tape that goes with it (I imagine this is same in all areas of the NHS). I'm quite up and down with mine. I like the company but can't see me staying in the same job with them until it's time to clear my desk.
You're right about the pension reduction, that's not what we want so we are saving in other plans as well to replace or top up income.0 -
It isn't that popular, it just has vocal supporters who write lots of posts about it.
Oh. That's a pity as I was hoping you'd tell me it was perfect for our position :rotfl:To start learning about portfolio management and not fall into the "average active fund does less well than the index so picking a passive tracker fund that is guaranteed to always do less well than the index is best" logical fallacy. Which doesn't mean that passive trackers are bad, just that they aren't the perfect answer.
Fundology does a nice debunking of the fallacy and was written by a fund manager. Others will recommend books about portfolio construction that are useful, along with the clearly incorrect but still useful efficient markets hypothesis which you should know about, because it does matter - think of it as like the billiard ball model of atoms, not right, but still useful.
I'll look into these though I'm afraid I don't know anything about chemistry either, that's more husband's arena.Watch out for US studies and books. The UK isn't the US and has different tax laws and investments that can change the answers. The US has particularly onerous tax for active managed funds that the UK does not have - in the US capital gains tax is higher for holdings of less than a year and due to be paid by investors in the year it's incurred on the individual buys and sells within a fund. In the UK it's not higher and no CGT is due until the fund is sold, what happens to holdings within it doesn't matter to an individual's tax position. This is one reason why in the US a study of active funds found that they beat the index on average before tax but not after tax.
Good pointI tend to favour a core global growth tracker fund and lots of active managed funds. Don't stick to one type or the other, use whichever is best for the particular job at hand.
What would be a good example of a core global growth tracker fund? Does lots of active managed funds mean picking individual funds (and is a fund still a mix of companies?)I'm particularly uncomfortable with bond tracker funds at the moment, given what is going on in the bond market.
I don't know what's going on in the bond market.
Quite honestly, where our investments / potential investments are concerned I feel a bit overwhelmed. I don't feel like I know where to start, there's so much out there and I'm worried about getting it wrong. I don't want that to result in doing nothing - cash isas are definitely not going to allow us to achieve our goals.
Where would you start if you were me and bearing in mind my beginner status, is going for something like the Vanguard better than doing nothing even if it's not the best thing I could be doing or could that end in a bad way?
I'm really grateful for everyone's help, I know it's tedious when the questions are this basic but I do really appreciate it.0 -
When you get your forecast is that based on paying in the maximum number of years? So if he left in 2015 but didn't draw it until 60 would it be to the value of today's forecast or is that forecast based on working to retirement? (I have a feeling that is a very stupid question, apologies. What I don't know about this stuff is ridiculous. Saying that, it's not my scheme)
Yes that makes sense and I understand it, thank you.
Yes that could make quite a difference. He is top of band 7, but don't think band 8 is out of the question by any means (not sure how far up it though).
I am pretty sure that the final salary remains based at the value at retirement. Not locked in at 2015 and uplifted etc.
Some elements of the new scheme based on career average is thats its 1/54th accrual, revalued at CPI plus 1.5%. This was more generous than the first mutterings from the government and could be seen as a victory to the unions in their fight against the changes.
With the state of the economy i cannot see inflation busting wages in the public sector for a long time (well not for the coal face). Certainly restraint of 1% is i think flagged out till 2017 and current talk is of controlling increment progression. I can only see japenese style steady state for the next 10 years plus, this cant generate public sector inflation busiting pay rises. I really think we need to face up in competitive world, the UK will stagnate rather than grow above inflation.
For your DH, it s worthwhile thinking through where his career will go. If he is not going beyond band 7 and is top now, i think CPI plus 1.5% may be beneficial.
Other issue of course that his pension is worth less from RPI to CPI shift. Most of the economic analysis i have seen is that this is the biggest control on costs of the new pension changes, plus the extra costs generated from employee contributions. Drawing you pension breaks the CPI + 1.5% to just CPI when in payment.
My previous objective under the old scheme was to retire late 50s. I think these changes pushes this to 60 -62. Individual circumstances are all different of course, I have 3 children to support, which probably means some significant outlay now, and even larger over the next 12 years.
Career average probably has rather more limited impact upon me as i cant see myself getting further promoted etc. Reached my peak at 42! Now that's a depressing thought!
However for a young doctor/managerial high flyer with most of her career to go will be a significant impact.
Your DH should benefit to some degree form the new state pension arrangements. For myself with most of my career in the opted out pension of the public sector was only going to get 110 per week. With 10 years post 2016 i should recieve £150 p-er week. Of course at a cost of some additional NI.0 -
don't know what's going on in the bond market.
Quite honestly, where our investments / potential investments are concerned I feel a bit overwhelmed. I don't feel like I know where to start, there's so much out there and I'm worried about getting it wrong. I don't want that to result in doing nothing - cash isas are definitely not going to allow us to achieve our goals.
Sounds like you have two choices.
REad up on investments, investing. the economy (which would tell you why the bond markets are perceived to be in a bubble) or hire an IFA to help you choose investments based on your risk profile and your goals. Start with the money pages in broadsheet newspapers which explain things like funds and bonds etc, then on to more intense matter like books on investing.0 -
Nice try. It's not too bad. Tracers in general are good for those who want to put money in and never pay attention again. I have a feeling that this does not and will not describe you. Even if you don't know so much today, nor did I a few years ago. This isn't their only use, it's just that when using actively managed funds you have to pay attention to the manager changes and performance as well as the performance of particular general classes of investment. So a bit more work and it can take a bit longer to learn.Oh. That's a pity as I was hoping you'd tell me it was perfect for our position :rotfl:
Just ask him to explain the difference between the billiard ball model of atoms and reality. If he starts to talk about something other than orbitals and probability distributions and wanders off into mathematical equations tell him to stop unless you enjoy pure mathematics...I'll look into these though I'm afraid I don't know anything about chemistry either, that's more husband's arena.
The one I use is Vanguard FTSE Developed World ex(cluding) UK.What would be a good example of a core global growth tracker fund?
Yes and yes.Does lots of active managed funds mean picking individual funds (and is a fund still a mix of companies?)
Bond prices have been increasing for well over a decade and there is reason to believe that there's a large price bubble that may cause a sharp decline in prices once interest rates start to return to more normal levels. This would happen in part because a bond pays out a fixed amount of interest. To pay more the price has to drop, so if you need to sell after interest rates have risen you will need to sell for less or you wont' find a buyer.I don't know what's going on in the bond market.
Just jump in and do reading as time allows. It does become clearer over time. Nothing you an do with funds will be too bad to undo later after learning from the experience.Quite honestly, where our investments / potential investments are concerned I feel a bit overwhelmed. I don't feel like I know where to start, there's so much out there and I'm worried about getting it wrong. I don't want that to result in doing nothing - cash isas are definitely not going to allow us to achieve our goals.
Jump in. It's OK, not wonderful, not horrible.Where would you start if you were me and bearing in mind my beginner status, is going for something like the Vanguard better than doing nothing even if it's not the best thing I could be doing or could that end in a bad way?
Read my posts from 2005 and 2006...I'm really grateful for everyone's help, I know it's tedious when the questions are this basic but I do really appreciate it. Everyone starts out knowing nothing. Just takes getting started. 0 -
Thanks for that. Will be double checking everything with the administrators but I'm getting to the point where I'm working out the things we need to ask now.I am pretty sure that the final salary remains based at the value at retirement. Not locked in at 2015 and uplifted etc.Some elements of the new scheme based on career average is thats its 1/54th accrual, revalued at CPI plus 1.5%. This was more generous than the first mutterings from the government and could be seen as a victory to the unions in their fight against the changes.
With the state of the economy i cannot see inflation busting wages in the public sector for a long time (well not for the coal face). Certainly restraint of 1% is i think flagged out till 2017 and current talk is of controlling increment progression. I can only see japenese style steady state for the next 10 years plus, this cant generate public sector inflation busiting pay rises. I really think we need to face up in competitive world, the UK will stagnate rather than grow above inflation.
His pay hasn't moved since Oct 2011, not even 1% in April 12 or 13.IFor your DH, it s worthwhile thinking through where his career will go. If he is not going beyond band 7 and is top now, i think CPI plus 1.5% may be beneficial.
I think it's definitely possible he could have further to go.IOther issue of course that his pension is worth less from RPI to CPI shift. Most of the economic analysis i have seen is that this is the biggest control on costs of the new pension changes, plus the extra costs generated from employee contributions. Drawing you pension breaks the CPI + 1.5% to just CPI when in payment.
My previous objective under the old scheme was to retire late 50s. I think these changes pushes this to 60 -62. Individual circumstances are all different of course, I have 3 children to support, which probably means some significant outlay now, and even larger over the next 12 years.
Indeed they are. We have no children or other dependants and so don't have to plan for uni fees / weddings (only our own), house deposits etc.ICareer average probably has rather more limited impact upon me as i cant see myself getting further promoted etc. Reached my peak at 42! Now that's a depressing thought!
You never know what opportunities might come along.However for a young doctor/managerial high flyer with most of her career to go will be a significant impact.
Your DH should benefit to some degree form the new state pension arrangements. For myself with most of my career in the opted out pension of the public sector was only going to get 110 per week. With 10 years post 2016 i should recieve £150 p-er week. Of course at a cost of some additional NI.0 -
Sounds like you have two choices.
REad up on investments, investing. the economy (which would tell you why the bond markets are perceived to be in a bubble) or hire an IFA to help you choose investments based on your risk profile and your goals. Start with the money pages in broadsheet newspapers which explain things like funds and bonds etc, then on to more intense matter like books on investing.
I enjoy reading the financial pages, when I understand what it is I'm reading. I think the only way is to just get stuck in and start piecing things together. Maybe something like Investing for Dummies could be useful? I have considered paying for advice but really I'd like to avoid that if possible. Being knowledgeable about this stuff is appealing! (though I realise there's a long way to go)0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.2K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.2K Work, Benefits & Business
- 600.9K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards