Shall I opt out of my NHS Pension..and save the money instead?!

PurplePfeiffer

Good morning.

Ive been in the NHS since 2008, working as a qualified nurse in London. I'm 27 years old.

I'm currently a senior nurse, basic salary is 30k, but with unsocial hours I take home around £2,200 every month. £3,042 before tax so around 36k. My contributions for my pension (last month) £282.99 and they range around this figure.

So, I recently (last week) got a new job, up a band, starting salary 36k rising to 46k over the years, no unsocial hours as its a 9-5 job. My contributions will increase and as I am on the 2008 NHS pension scheme, I won't get a large lump sum. I will have to work until I am 65 and don't think I will be able to enjoy my hard earned money with monthly payments. My knowledge of the NHS 2008 pension is limited and I am totally stumped.

I have contributed almost 6 years to my pension, I was thinking if its a good ideas to opt out, create a standing order for with I roughly pay each month then invest in a property in many years to come. The income generated is a pension in its self? Perhaps my knowledge of my pension isn't the greatest. With at least another 37 years to go, if I save even at what I contribute now on my current 30k salary, I will could save £136,800 with dedication which I think is much more than what I will get with my NHS pension.

I'm fortunate enough to save and started last year Jan 2013, target 11k a year and so far I am on target so I know that I will be able to save.

Would any of you experts advise on doing so?

Please help!! :beer:

Thanks:T

taking_stock

short answer - NO!!


as agreed by everyone, as per this thread..
https://forums.moneysavingexpert.com/discussion/5037714


the answer seems to be to move to a different part of the country, with a better quality of life, more housing, less crime etc etc etc

chucknorris

Whatever you do, do not stop contributing into that pension. Properties can be good investments, we have 8 in London (excluding our Dorking home). But the best value thing I do currently is continue paying into my teachers' pension scheme (TPS). The only reason I am not already retired is because I am buying the max allowed additional pension in the TPS, which I will finish doing next year, then I will retire. The NHS scheme will be just as excellent.

jem16

PurplePfeiffer wrote: »

My contributions will increase and as I am on the 2008 NHS pension scheme, I won't get a large lump sum.

You can have a lump sum if you wish by commuting some of your pension at a rate of 12:1. However you get a much better deal by not doing so as the pension is much more valuable.

I will have to work until I am 65 and don't think I will be able to enjoy my hard earned money with monthly payments. My knowledge of the NHS 2008 pension is limited and I am totally stumped.

You really need to learn about your pension as it is one of the best around. With the change to a CARE scheme from April 2015 your retirement age will be your state pension age. However this is still going to be a very good scheme.

What you save by not paying into the scheme will be very much smaller than your contributions as you will pay more in tax and NI.

I have contributed almost 6 years to my pension, I was thinking if its a good ideas to opt out, create a standing order for with I roughly pay each month then invest in a property in many years to come. The income generated is a pension in its self?

So do you plan to rent out this property or live in it? If rent do you have experience of being a landlord? If living in it what happens when you sell it to provide your pension? Where will you live then?

Perhaps my knowledge of my pension isn't the greatest. With at least another 37 years to go, if I save even at what I contribute now on my current 30k salary, I will could save £136,800 with dedication which I think is much more than what I will get with my NHS pension.

Nowhere even close. An index linked pension with dependent's pension of £20k will be worth around £650,000. You would also not save £136,800 as you will have to pay more tax and NI.

Would any of you experts advise on doing so?

Please help!! :beer:

Thanks:T

No one here will advise you to do anything other than stay in the NHS pension scheme. Nothing else that you could do will even come close and it would rank as the worst financial decision you ever made.

PurplePfeiffer

Thank you, thank you, thank you.

I really appreciate your replies and yes @Jem16 I do agree, I don't know much about my pension which is probably why I thought it would be a good idea to opt out. Reading your replies has put things into perspective and it all makes sense.

I will not opt out

jem16

PurplePfeiffer wrote: »

Thank you, thank you, thank you.

I really appreciate your replies and yes @Jem16 I do agree, I don't know much about my pension which is probably why I thought it would be a good idea to opt out. Reading your replies has put things into perspective and it all makes sense.

I will not opt out

Glad to hear that.

Best thing you can do is go to the NHS pension website and read up about your pension. Then once you have done so make sure none of your colleagues ever make the daft decision of opting out.

http://www.nhsbsa.nhs.uk/pensions

jamesd

You definitely don't understand the value of your pension very well. Your plan is frankly crazy. Trading one of the best pension deals available for the uncertainty and almost certainly far lower value of BTL property gains. jem16 has given you some numbers that should help you to understand just how foolish your plan is. Just in case you didn't know it, cohort life expectancy for 65 year old women today takes them to around age 88 and something around half live longer than that. Many people see life expectancy at birth numbers and don't realise just how much better the real numbers are for those retiring who have outlived childhood and early adulthood causes of death.

While it's true that the retirement plan has a set end date, that is not the date at which you have to retire. You can retire whenever you like by doing what others do: making independent provision to accumulate a pot of money that you can live on between retiring and the start of the work pension and eventually state pension.

There are many ways of doing that. One that even those who did no planning can use is to use equity release if they own a home. Then they can repay the equity release mortgage from their income when that starts.

But you can do better than that with planning. You can pay into a personal pension as well as the NHS pension, then later draw on it as fast as you need to to pay your living costs. It's not remotely close to being as good a deal as the NHS pension but it's still a good one compared to alternative ways of providing for retirement income.

First thing to do is work out how much after tax income you want. Then it's a case of working out how much to put into the personal pension to accumulate enough to live on for those years until the other pensions start. A few examples of your monthly net extra pension cost for various retirement ages, assuming that you want an income of £15,000, age 27 now, 4.5% growth rate in today's money and basic rate tax relief:

Age 55: regular savings calculator, £100 a month, 28 years, 4.5% interest (under the after inflation 5% or so average UK stock market growth rate), pot size £67,123. Ignoring income can sustain £5,163 a year for the 13 years to a state pension age of 68. So around £300 would get to £15,000. That's including the tax relief so net cost to you is £300 * 0.8 = £240 a month.

Age 60: up years to 33. Pot size £90,739, ignoring income provides £11,342 a year for the 8 years to state pension age. So £133 a month can provide the target income. After tax relief that's £106.40 net cost to you.

Age 65: up years to 38. Pot size £120,301, ignoring income provides £40,100 a year for the 3 years to 68. So £37.40 a month gross, net £29.92 cost to you.

Easy enough to plan for whatever retirement age you want and keep the great pension deal you have.

atush

Shall I opt out of my NHS Pension..and save the money instead?!

Only if you are incredibly Dim.

I'm fortunate enough to save and started last year Jan 2013, target 11k a year and so far I am on target so I know that I will be able to save.

Why not save this money into a DC pension? Where is it being saved now, as cash?

I will have to work until I am 65

A DC pension, alongside your NHS pension means you can retire younger than 65 w/o a reduction as you can use the DC pension pot.

Koicarp

OP also needs to take a look at the normal retirement age for her pension- it isn't 65!

Deneb

Koicarp wrote: »

OP also needs to take a look at the normal retirement age for her pension- it isn't 65!

It is in the 2008 scheme.

Ive been in the NHS since 2008, working as a qualified nurse in London. I'm 27 years old.

benalder284

As someone who works in finance the public sector, I am frankly amazed at the number of public sector employees who post on this site with little or no understanding of the utterly stupendous nature of their DB pensions. There is no alternative with a similar risk profile that will provide anything like the benefits of a public sector index-linked pension. Don't consider opting out unless you like the idea of poverty in old age.