What % contribution should I make?

nomunnofun

abundant1972 wrote: »

I will be entitled to a full state pension, and I am able to take a lump sum at 3 x my annual pension amount I think (with subsequent fall in annual pension). If I retired at 65 I'd only have a few years to manage on a lower income.

Unfortunately I have come across a lot of people who are under the 2008 scheme, as you are, who believe that they will receive an annual pension with a lump sum of three times that amount with no commutation of annual pension. This is despite the fact that they were never members of the 1995 scheme where that applies.

1995 scheme members, who still work on eightieths, were offered the option to move to the 2008 scheme with a deadline of April 2012 to make that choice - I only know of one who did (six months before retirement - a disastrous decision!)

There does seem to be a lot of misinformation out there and I suspect that this will only get worse as the reforms kick in in a couple of years time.

atush

You do get more perks than your pension, try Death in service benefits?

Anyway, I agree with James. While having more pension is a good idea eventually (ie buying added years) you are on a DMP with a plan to eventually own a home (which is good for retirement as well). So you need to start saving, hard to fulfill that dream. In Isas, cash at first then S&S ones.

And think about upping your hours beyond 30.

abundant1972

Thank you Jem16, Nomunnofun and Atush for your advice... again - really helpful and valulable. I'm starting to feel like I am getting more of a handle on all this stuff... certainly they don't make it straight forward or easy to understand!!!

I think your advice on saving for a deposit first sounds like a good plan, and I will look into AVC (currently the NHS runs those schemes through Prudential and Standard Life I think). At least that is a scheme I can easily add too as and when I can afford to, and also monitor what it's roughly worth to me easily online.

I'm not sure I'd count 'death in service' as a perk, at least not in my circumstances - as I have neither a partner nor children. Whilst I may get a partner in the next 20 years I suppose, I'd have simply preferred a better wage that I can enjoy whilst I'm still alive

Thanks again for the advice.

ispookie666

AVC vs private pension like SIPP. Which one should i consider.

Never knew that NHS was contributory! is it really 14%?

abundant1972

I think people are saying the NHS is a 'defined benefits' scheme... the 14% contribution rate sounds good - but actually doesn't make a difference to the end product... We are guaranteed a sum regardless of their contribution rate... however - they can (and have!) recently made us pay more (I used to pay 6% and now pay 9%) which is reflected in my pay packet.

... I think I got that right?

I'm not sure why the NHS advertise they pay 14% as it's just misleading... I suppose though we do a get a larger end pension than many private pensions would be perhaps...?

Argggh. I feel like a total novice!!!

jem16

abundant1972 wrote: »

I think your advice on saving for a deposit first sounds like a good plan, and I will look into AVC (currently the NHS runs those schemes through Prudential and Standard Life I think). At least that is a scheme I can easily add too as and when I can afford to, and also monitor what it's roughly worth to me easily online.

Don't just limit yourself to AVCs via the NHS. You may find a Personal Pension better.

ispookie666 wrote: »

AVC vs private pension like SIPP. Which one should i consider.

Whichever is the most suitable for what you want it to do. AVCs are only really good if they allow the pot to be used to fund the tax-free lump sum. The NHS does not allow this.

Never knew that NHS was contributory! is it really 14%?

Yes but it's got absolutely no bearing on the defined benefit that you get through the NHS.

jem16

abundant1972 wrote: »

I think people are saying the NHS is a 'defined benefits' scheme... the 14% contribution rate sounds good - but actually doesn't make a difference to the end product... We are guaranteed a sum regardless of their contribution rate... however - they can (and have!) recently made us pay more (I used to pay 6% and now pay 9%) which is reflected in my pay packet.

... I think I got that right?

Yes you have. Your employer's contribution is immaterial. The NHS haven't made you pay more - the government has.

I'm not sure why the NHS advertise they pay 14% as it's just misleading... I suppose though we do a get a larger end pension than many private pensions would be perhaps...?

They're just letting you know that the employer does pay towards your pension.

Andy_L

abundant1972 wrote: »

I'm not sure why the NHS advertise they pay 14% as it's just misleading... I suppose though we do a get a larger end pension than many private pensions would be perhaps...?

The 14% is the current estimated figure that the employer would have to pay if it was an invested scheme with a big pot of money to pay the staff pensions. That 14% is, instead of being invested, used to pay current pensions and any excess/shortfall goes to/is made up by the treasury out of tax income.

Its done so:
a. Staff have an idea of the value of the pension when comparing jobs
b. The employer has an idea of the true cost of their staff so they can make planning decisions on permanent staff vs equipment vs contract staff with out it being distorted by permanent staff having "free" pension costs

atush

I think your advice on saving for a deposit first sounds like a good plan, and I will look into AVC (

I agree with Jem, an AVC may not be better for you (even if 'easier') as it sisn't flexible, and I think has to be taken at the same time as yur NHS pension. A PP is more flexible in that it can help yuo retire earlier than your main scheme.

And Deposit/debt takes precidence before either.

Andy_L

atush wrote: »

I agree with Jem, an AVC may not be better for you (even if 'easier') as it sisn't flexible, and I think has to be taken at the same time as yur NHS pension. A PP is more flexible in that it can help yuo retire earlier than your main scheme.

AIUI AVCs are a legacy from the old days when if you were in a company pension you couldn't have a private pension as well so they existed to let people top up company pensions.

Their only advantage over PPs are if you can preferentially use them for the lump sum (which, as said earlier you can't in the NHS scheme) or the employer has negotiated a good bulk-buy discount on fees