NHS pension and early retirement

PerfectMess

Hi I am 25 and I am looking into ways to retire early as I will currently be working to probably 70 with state pension questionable and NHS pension tied to the same age. So I need to either take actuarial reduction or bridge the gap.
I have started a PP with £150 pm (currently £5000) and S&S ISA £500 pm (currently £10500) with odd extra lump sums to ISA.
I have recently found the ability to buy additional pension and this seems to cost just under £6000 for each extra £1000 I buy (based on my age). The FAQs state if I buy and have a break in service this would affect it and the arrangement may be terminated but this would be based on an installments arrangement? I am wondering if I can buy an extra £1000 now and another £1000-£5500 at another time by either lump sum or installments. These would incur the actuarial reduction as per standard pension so I am unsure whether this would be worth it or not.

Edit: As per suggestion by ewaste I do already own a house with a mortgage at 1.79% fixed until 2019.

ewaste

PerfectMess wrote: »

The FAQs state if I buy and have a break in service this would affect it and the arrangement may be terminated but this would be based on an instalments arrangement?

As I understand it Yes, payment by lump sum would be a completed transaction whereas instalments would come out of your pay which you could no longer make if you were no longer an active member but instead became a deferred member.

PerfectMess wrote: »

I am wondering if I can buy an extra £1000 now and another £1000-£5500 at another time by either lump sum or instalments.

Again as I understand it as long as you are an active member of the scheme you can buy additional pension up to the limit of £6500, the risks being at some future date they remove or fiddle with this option and the known risk of the cost increasing as you age.

PerfectMess wrote: »

These would incur the actuarial reduction as per standard pension so I am unsure whether this would be worth it or not.

Have you thought about Early Retirement Reduction Buy Out (ERRBO)?


From reading your other posts you've already got property sorted(?) therefore a LISA is no longer as much of a nobrainer as it might have been which is why I'd imagine you've also set up the private pension (SIPP?). I'd maybe amend your original post to mention you own a property or already have a mortgage as it's likely to be brought up.

I think yours is a difficult question to answer given the timeframe involved, buying additional pension is usually an easier decision since it's index linked income at a far better deal than you would get elsewhere. My only hesitation is what investment return could be had on that money given the time frame and the risks of Governments changing the goalposts, there is so much that can happen from stock market crashes to hyperinflation to war to aliens invading...

I'd want to find a way of running the numbers on various options but if I were risk adverse I would probably do it as a risk reduction to complement investments. Furthermore I perceive one of the biggest risks is the Government getting rid of the unfunded liability of a Defined Benefit pension so getting more of a DB 'promise' while you can seems like it might be a good move.

Sorry I've probably not helped that much

justme111

does look cost neutral/ish to me.
I would be tempted to buy some while I can for diversification purposes (unless there are high chances of you gitting LTA).

PerfectMess

Thanks I have tried editing post but phone won’t let me so will try again tonight.
Yes I have a house but I was still thinking of a LISA for tax free income to dip into as required.
It is the statement that even if you do return to the NHS following a break you can’t go back to buying additional pension. This was also in the ERRBO section which is more aimed at people who were on the 2008 scheme that had a retirement age of 65. It seemed a lot more expensive to me at 3% I think extra of my salary to buy 3 years early. I think I need to clarify with a pensions officer the option to reinstate the buy out following a break in service. I guess that this would mean that at 64 years I would only take a 1 year actuarial reduction rather than 4? Or is this incorrect and I would be unable to take pension before 65?
Think I’ll make a big spreadsheet tonight regarding each future year under the impression that I will stay in the scheme throughout my career.

Edit from pension officer: She basically directed me to possibly updated versions of the factsheets. These showed that ERRBO would stand even if I retire early. Actuarial reduction would apply from say 60-65 if I retired at 60 and had bought ERRBO for 3 years. Not sure whether this can be stopped and restarted yet though.
The additional pension can be purchased on more than one occasion up to the limit so I think that I will definitely purchase 1-2k this year.