32 year till retirement pay our mortgage off Vs NHS pension

RickyB2000

Why not ask them to reduce your husbands salary back down again?

jimi_man

kara_p_uk wrote: »

Thank you this is really helpful, it has explained the numbers a lot clearer than my head had done. He doesn't have any previous contributions he only joined in 2016. We knew we lived to the edge of our means with our income but this April payday when we didn't realise he would be going up to the next pension contribution bracket is why we have panicked.

I'm sure. You panic and think 'how can I cut costs else I'll go under' so you look at your outgoings and think 'god, is this pension really worth it' especially with the changes that have happened to the public sector pensions.

I'm hoping you'll think twice now and look at other ways to cut costs (and there always are some). I went through similar things with a wife working part time and two young kids. She also worked for the NHS, me for another public sector. But you do get through it and as I'm now in receipt of a public sector index linked pension, as well as working - all I can say is.....whatever you and your husband do - please don't throw it away!!!!

Yes it's a long way off, but there are ways to mitigate that. As you get older and have more disposable income (it will happen) then you can look at alternative ways to bridge the gap if you leave early. I've learnt a lot on here and that's what I'm currently doing (I'm early 50's), building up an alternative pot so we don't need to work till we are 67/68. But neither of us would ever throw away the one sure stream of income. And neither should you.

hyubh

kara_p_uk wrote: »

my mum is 55 this year. Her teachers pension has been quoted as 25k lump sum and £330 a month she has paid into her pension for about 20 years and some of that as part time but had a gap of 6 years in the middle.

What do you want, tiny violins, to go with the tiny viola for Junior's tennis lessons and the tiny cello for the Spanish holiday home? The TPS is a great scheme, like the NHS one. That said, those numbers look to be bunk. Tiered contribution rates have been going for under half that period; before there was just a flat employee rate of 6%. If 25K is a standard lump sum, then she must have NPA 60 final salary benefits (and as such, be a pre-08 starter who hasn't had a service break of more than two weeks since). However, this standard lump sum was/is three times the annual pension.

If instead the lump sum quoted is the maximum possible, it is based on a very poor commutation rate of 12/1, i.e. quoting that rather than the standard pension suppresses the true amount of the latter.

Thicko2

Dear kara


Jim man's posts have giving the most coherent and accurate position of what you would be giving up if you followed your proposed course of action. I suggest you reflect on this but I would suggest it shows the folly of giving up on the NHS pension.


The contributions bandings of the NHS pension does create a bit of a cliff edge in your particular circumstances. But long term it will create more pension, has he got more increments that makes this a temporary scenario rather than forever?


I applaud the things that you are trying to do for your children in term of lessons etc. You are a victim of the stretched middle, no likely NHS pay rises beyond 1% and trying to do the right things but wanting to keep the holiday home above everything else. Clearly the holiday home drives your financial position to the limit, and a rational choice is which bit of lifestyle to drop. Emotional attachment to the holiday home must be quite high.


How about utilising the holiday home asset. Can you generate £1500 rent per annum to cover the costs to a degree through NHS noticeboards etc?

Triumph13

And if it helps, I was spitting tacks when our kids got older and my wife increased her hours - just enough to go into the next LGPS contribution band.

Thicko2

Triumph


One difference between lgps and NHS schemes is contributions in NHS is by full time value of the band. Lgps is by hours worked?

Triumph13

Thicko2 wrote: »

Triumph


One difference between lgps and NHS schemes is contributions in NHS is by full time value of the band. Lgps is by hours worked?

A recent change. She actually went high band despite being part time, then lower band when the rules changed, then high band again because she increased her hours to be £21 pa over the threshold.:mad:

peter3hg

Broadly speaking the 12.5% contribution rate has been carefully calculated to be barely anymore expensive than the 9.3% rate below it. This is because at the 9.3% you will normally be at basic tax rate whereas at 12.5% your salary is in the higher tax band. Therefore the true contributions are actually 7.44% (9.3% x 0.8) and 7.5% (12.5% x 0.6). Unfortunately your husband doesn't quite earn enough to get the full relief but if you can hold out for a few more increments/pay awards the cost of the pension will fall in percentage terms.

If he is earning £48k then, for this year alone, he will earn a pension of £1,432 per annum when he retires in 32 years (in today's money taking inflation at CPI rates). Therefore the £4k he will pay in net pension contributions this year are unbelievably good value.

MonkeyDr

OP, I don't know how much over the threshold your husband is but have you considered using salary sacrifice schemes to get him back below it?

I expect you already get childcare vouchers. Other things include cycle to work schemes, professional subscriptions etc.

I think (but am not certain) that it would reduce pensionable pay and therefore has potential to go back under the cusp and drop contributions back to 9.whatever% in the lower band. You would need to look very closely at the numbers but for some people the calculations work so that you have more net pay (albeit at the expense of a marginally lower pension in years to come), whether you want a bike or not...

kara_p_uk

Thank you, we do get childcare vouchers but I didn't realise they would potentially reduce him to under the tax/pension contribution threshold, this is definately worth us looking into as he is only in the 12.5% bracket by a few hundred pounds.

MonkeyDr wrote: »

OP, I don't know how much over the threshold your husband is but have you considered using salary sacrifice schemes to get him back below it?

I expect you already get childcare vouchers. Other things include cycle to work schemes, professional subscriptions etc.

I think (but am not certain) that it would reduce pensionable pay and therefore has potential to go back under the cusp and drop contributions back to 9.whatever% in the lower band. You would need to look very closely at the numbers but for some people the calculations work so that you have more net pay (albeit at the expense of a marginally lower pension in years to come), whether you want a bike or not...