NHS Pension options

cynicaldoc

Hello

I have worked in the NHS as a doctor since 2010 and have paid into the NHS Pension scheme since then.

I will become a Consultant in Aug 2019 (all being well) at which point I will be 33 and thus face 34 years until official pension age. I should therefore max out my £1mill pension cap (I think).

I have a few thousand pounds in a S&S ISA that is a year old.

I am currently 31. Married, mortgage on house, no kids yet.

Options I am considering:

1) Move current S&S ISA into a S&S LISA. I will achieve £4K before end of this tax year and max this out. Plus receive £1k top up from HMG. Stick any spare cash in my normal S&S ISA (£16k left in annual ISA).

Do this until I'm 50 and I'll have 20 years x £5000 plus any gains on investments in my LISA.

Leave that to compound to 60 and then use it as bridge until NHS pension. I realise this means I will have a large pot of cash I'm not allowed to touch for 30 years without severe financial penalties.

2) Continue with S&S ISA and try and save as much as possible

3) Try and add more to NHS pension - although I'm pretty I'll max out before retirement age so think this is not the best option.

Thanks.

justme111

d) add to NHS pension while you still work there , quit when you have enough (hopefully that moment arrives before you suffer nervous breakdown) as I doubt you will want/will be able to work till 67

kidmugsy

Bung as much as possible into pensions to exploit the 40% tax relief while it still exists. When it's scrapped, rethink.

Possibly avoid the LTA problem by retiring early from the NHS and accepting the Actuarial Reduction on your pension. If that notion implies that your extra pension contributions should be into a Personal Pension rather than with the NHS scheme, so be it.

tibbles209

From your post it sounds like you are aiming to retire at 60?
Have a look into Early Retirement Reduction Buyout. I am a doctor in the NHS too, and I pay an extra 3.69% of my salary to buy out 3 years early retirement reductions (in other words I can take my pension 3 years earlier than my normal retirement age without actuarial reduction).

S&S LISAs are a reasonable option for bridging if you will hit LTA with your NHS pension. Unlike pensions, they have the benefit of being accessible early (albeit with heavy penalties) if you were to need the money in an emergency.

The other thing to consider is your spouse's pension. I intend to retire at age 60 (27 currently), my current normal pension age is 68 (although most likely will be 69 or 70 by the time I get there, but I will get to take my NHS pension 3 years earlier because of my ERRBO contributions). The years inbetween we are planning to cover with drawdown from my husband's DC pension plus S&S LISAs.

crv1963

Hi Cynicaldoc,


I'm at the other end to you I NHS Retire next year with full pension.


I'd suggest a mixture- SIPP to get the 40% tax relief and build a pot up to bridge the gap between retiring and NHS pension starting the lifetime allowance may mean only a modest pot needs building and you can draw it down to zero if need be age 57-67 (what we plan for my wife). Pay the % to get access without reduction to the NHS pension and this pot will have to last a shorter time. Put money into LISA and S&S ISA.


Decide a rough year/ age that you actually want to retire and work back from that in terms of what and where to save your money. If your spouse has less pension provision it maybe that increasing this is the most efficient way of going about your planning as HMRC will top theirs at 20% or 40% depending on their tax bracket.


As an aside we put any on-call, ad hoc, mileage claims allowance or overtime payments into a rainy day fund that occasionally gets dipped into for luxury things like the odd weekend away, that's additional to our emergency fund for mundane things like boiler repairs, or appliance replacement. We work on the basis that we don't have it as a regular income so it isn't in our budget planning- you'll be surprised how fast it builds up and we don't count it in our savings totals it is just there!


As justme111 says it is unlikely that you will want to work until you are 67, most consultants I work with go 55-60, although MHO status under the 1995 scheme helps. One I was discussing retirement with last week is going next year at 55 and is going to concentrate on working a couple of days a week in an area of psychiatry that he has a particular interest in, rather than the generic work he has to focus on in his current role. His view is that he will be able to "give something back whilst being too young for my slippers, pipe and daytime tv!"

TARDIS

If you intend to continuing working full time you will probably hit the LTA in your early 50s, assuming they don't change the scheme yet again.

They've pulled he NHS calculators for some reason but the Northern Ireland one seems the same to me and will give you a very rough estimate: http://www.hscpensions.hscni.net/2015-scheme-calculators/

I'm in a similar position but a decade or so ahead of you and plan to jump ship late 50s. I'm opting to put more in OH's SIPP so I don't go even further over the LTA and plan to take the 2015 scheme pension a few years early to take enough actuarial reduction to drop it beneath whatever the LTA is then, assuming it's still calculated in the same way at that point. I'm also saving in a S&S ISA to bridge any gap although we'll be able to use OH's SIPP before NPA too. I think your first option sounds best, but then I would as it's closest to mine :-)

I think it's unlikely the 40% pension relief will go anytime soon personally and you need to be aware of the reductions in death benefits if you choose to stop paying into the scheme when you hit LTA as a previous poster suggested. I have heard of some members opting out then in again for one month a year to preserve death in service benefits, but these are usually locum GPs and there is talk of closing this loophole in the future.

It's great that you're thinking about this now. One thing to bear in mind is that if you do have kids they can be very costly for longer than 18 years so that may affect the age you opt to retire in the end.
Also try to avoid lifestyle creep. Many new consultants seem to think they need to "invest" in fancy new suits, flash cars etc - fine if that's what you want, but you may have to work longer to pay for such things.

cynicaldoc

Thanks for your tips. A little clarification of my situation:


My wife is a salaried GP working full time.
Baby due next year.
£225k mortage on £375k house at 1.75%. Currently overpaying by 100% per month. Remortgage early next year.
£4k in S+S ISA started exactly one year ago. Overfaffed with funds/stocks has left me with a meagre 3.55% gain over 12 months.


To put my lavish lifestyle in to perspective, I have been looking at a Nissan Leaf haha! And as an anaesthetist I don't need fancy suits - I have a grey Coroner's suit and a Navy Wedding/Interview suit...!


Perhaps I am best to try and reduce my pension age as much as possible with ERRBO - I believe the maximum is three years early? Ideally I would like to retire around 55, but definitely by 60! I could build up a substantial ISA in the next 25 years to bridge the gap between retirement age and NHS pension.


Perhaps I am best to keep a normal S+S ISA rather than convert it to a LISA as then I can take it all out if everything goes wrong. Although I would miss out on £19,000 contributions from HMG if I went down the LISA route. 32 this tax year so 19 years until 50 years old with £1000 HMG contributions p.a. However, I can manage saving £4kpa in to a LISA for the foreseeable future to capture HMG £1k p.a contribution. Even though I plan to keep my normal S+S ISA for at least 25-30 years, for some reason I remain really nervous about locking £4k p.a. away until I am 60! This would give me 19 years x £5000 = £95,000 when I am 50. I would then not add any further and leave that to compound for a decade and drawn out at 60. Even with a meagre 5% compounding this would rise to £154k - I would hope to do better than 5% average over ten years though (plus the 19 years leading up to my 50th...)


I currently put any locum cash in to my S+S ISA so I don't notice it as extra income, as it sounds like you do crv1963. Any future PP I will do the same to max out my remaining £16k ISA allowance (if I go down the £4k p.a LISA route) plus future JISA I will set up when impending foetus arrives.


So, whilst I remain a little perplexed by pension things despite being relatively well-read (I think at least) over the last year about S+S ISA/LISA/investments.


So:


1) Is an IFA worth the cost at present? I think I am doing things right at my stage in life and don't earn hundreds of thousands (ISA/mortgage overrepayments/planning retirement before I even start my Consultant job!). Perhaps when I am a Consultant with PP this may be more worthwhile?


2) Add more to NHS pension: I think this is pointless as I will hit LTA


3) Continue NHS pension + add ERRBO


4) Conitnue NHS pension + add ERRBO + start a SIPP

5) Start S+S LISA and take the Government's contributions and any extra cash add to current S+S ISA allowance


Thanks