NHS pension + SIPP

coonra987

Hi everyone,

I'm a postgraduate medical student and already have an NHS pension. Recent interest in the profession's salaries and pensions have caused me to closely consider my financial situation. I shall be looking into this further over the next few weeks, but would appreciate any advice to help get me started.

I consider myself to be fairly frugal, and so I would now like to start passively investing any income I manage to not spend in shares, via a SIPP. I am already investing 5.6% of my income into my NHS pension. As my income increases, this will go up to 12.5%.

This puts me in a dilemma. I can either stop the NHS pension, and have all of my pension in a SIPP with Vanguard LS (and be able to contribute more to it each month).

Or, I could carry on with the NHS pension. In the past they have been some of the best pensions out there. Most of the noise from the profession now is that it isn’t anywhere near as good as it was, so I’m left wondering what’s the best thing to do.

I assume I'm allowed to contribute to both, as long as I don't contribute over £40,000 in a tax year (otherwise I'd be taxed on it). Am I allowed to have income from both when I’m retired? And presumably if I want to retire earlier, the SIPP would add a layer of protection (the NHS pension would penalise me significantly for taking early retirement).

Many thanks

JoeCrystal

Err, it is still one of the best in the country... Even though the conditions are getting worse, it is still one of the best in the country compared to any other retirement provisions. (12.5% is a pittance to pay compared to the benefits you will get back, unless you want to pay 25% or more into private pension for uncertain income instead). Keep paying into it and make your own retirement provision on top like private pension scheme, SIPP and so on.

PeacefulWaters

It's not as good as it used to be.

It's miles better than a SIPP.

You should almost certainly stay where you are. A SIPP (or AVCs) could be used to fund early retirement options in addition to your NHS scheme, which should be what your overall retirement planning should be built around.

zagfles

Yes there's no problem having both as long as you stay within the annual allowance. A SIPP might be a good idea for early retirement as you say.

Note that the annual allowance includes employer contributions, for a DB scheme this means notional contributions, they should supply you with a figure called the "pension input amount" - add this to any extra contributions you make to a SIPP to get the total pension input. You can carry forwards annual allowance from the last 3 tax years as long as you were in a pension scheme during those years.

kidmugsy

camspence987 wrote: »

I assume I'm allowed to contribute to both, as long as I don't contribute over £40,000 in a tax year

No. Your limit is the sum of your SIPP contribution and the annual addition to the value of your NHS pension. The latter can be very large in any year in which, for example, you get a promotion. The sum mustn't exceed £40k, except that you are allowed to carry forward unused annual allowance from the previous three years.

And the sum of your own two contributions shouldn't exceed your earnings in the tax year (or, at least, it can't usefully do so).

And then there's the lifetime limit, an idea so dim that you'd have to hope it will be abandoned soon, or at least increased by so much that it affects hardly anybody.

BritPop

The NHS pension is still a very good pension, even with the 2015 scheme. As well as the pension, you will have life insurance (death in service benefit), and provision for your dependents if you die. Also, don't forget your NHS employer will pay into your pension too.

I'd be cautious about a SIPP as you may hit the lifetime allowance (LTA) limit with your NHS pension.

xylophone

http://www.nhsbsa.nhs.uk/Pensions/4221.aspx

Had you considered a stocks and shares ISA?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508117/Lifetime_ISA_explained.pdf

atush

Have both. Never leave your NHS pension. Nothing you can do with your money (apart from betting on black and always getting it right) will do better. But you can do more with whatever money you have spare after.

Why?

Because, I assume you want to retire before 65/67/70 or whatever your DB NHS pension will pay out. How you do that, with the best result) is to NOT take your NHS pension early (if you want to say retire at 60 or so but before your scheme age). But to use a DC pension (be it PP or sipp or even avc?) to live on between when you want to retire, and when your NHS pension pays out w/o being reduced.

Find out the EXACT amount you are allowed, under the annual allowance (ie 40K or your income whichever is lower) and put whatever you have left over (after living costs, debt and pension and cash savings emergency pot needs) and place in a PP or sipp.

nb73

In time you could be contributing 14.5%

http://www.nhsbsa.nhs.uk/Documents/Pensions/Cost_and_Contributions_Factsheet_2015-16_(Officer)_(V1).pdf

hyubh

nb73 wrote: »

In time you could be contributing 14.5%

http://www.nhsbsa.nhs.uk/Documents/Pensions/Cost_and_Contributions_Factsheet_2015-16_(Officer)_(V1).pdf

Paying a 14% contribution rate on earnings of over £111,377.00... what a nice problem to have...!