Is the NHS pension enough?

randomer1

Hello everyone,

Just after some advice regarding pension planning. I am 28 years old and a Doctor in training. I am fully paid up to the NHS pension. However the problem is that the NHS pension isn't what it used to be and can only be claimed in full when I am 67, with penalties for retiring earlier.

What I'm wondering is whether I need to start another pension or have a saving strategy so I can retire before 67. I have looked into the following options.
Stocks and shares ISA - can withdraw money if needed
Lifetime ISA - no tax on withdrawal
SIPP - tax relief , but income may be taxed.

I am interested to hear your opinions, thanks

Ray_Singh-Blue

I think you are on the right lines. If you work full time, you can expect to earn very well later. So there is absolutely no reason why you should need to work to 67 unless you choose a lifestyle which is proportionally more expensive than average. That's your choice, of course.

There are lots of reasons why the NHS pension is good, but it is also good not to have all your retirement eggs in one basket. Give yourself a few options, down the track.

Of course the NHS pension can be drawn before age 67, but with actuarial reduction. This is not a penalty, it is simply a fair adjustment. One approach is simply to suck that up.

A SIPP can allow early retirement without starting to draw a defined benefit pension. Which is fine, unless the lifetime allowance may cramp your style. A NHS pension of £43K per year is valued by HMRC at £1m. It may not make sense to start a SIPP if you anticipate your NHS pension swelling to that sort of size.

ISAs are good. If your healthy pension means you are going to be a taxpayer in retirement, then it makes sense to fill up these tax shelters over your working life and enjoy tax free income from them later.

I'm no financial expert but have had cause to think this sort of problem through myself for one reason or another.

PS Don't forget the golden rule: one house, one spouse!

kidmugsy

It's not worth your while contemplating a SIPP until you become a higher rate taxpayer. By then the LTA may have been scrapped so that you could reconsider the matter then.

Stubod

..I find it hard to believe that as a qualified GP you will have any problems retiring early if you want to. Depending on your current financial status / house etc. I would not worry about doing anything to drastic in the short term, particularly as you don't really want to do anything that ties up your money. If you have "spare" money it would probably be best to go the S&S ISA route so if you are not into "DIY" you may want to consider getting yourself an IFA. At least with SS ISA's they are tax free, you can save a reasonable amount each year (£20k next year), and with the length of time you are looking at should see a good return. Plus you have the flexibility to take money out as and when you need it.

NB You can make "extra" payments into the NHS scheme. These are "safe", but not sure if they represent good value for money..and again I think they can't be taken until SPA...(which may well be greater than 67 by the time you get there).

justme111

Hi randomer. I would open S&S ISA. When situation is clearer with your working life/you crossed the milestones of a house purchase etc you could always get money from there into pension.
I am not familiar with LISA.

randomer1

Thanks for the input, seems to be that an ISA is the most flexible option.

Stubod

..nb, while the new NHS scheme is not what it was, it is still pretty good in terms of "guaranteed" returns and index linking for any money put in. Certainly a no brainer to join / stop in if you are working in the NHS.