A quarter of a million staff opt out of NHS pension

Zola.

The government haven't been very kind to the NHS on payrises etc.

Can you blame them for not wanting to invest in a pension, which the government set the rules on?

woolly_wombat

Zola. wrote: »

The government haven't been very kind to the NHS on payrises etc.

Which is why NHS workers should grab their pensions with both hands, so they don't miss out on them as well!

Can you blame them for not wanting to invest in a pension, which the government set the rules on?

Yes, I'm afraid I can blame them. I took a series of public sector jobs later in life specifically in order to make up for investing in an Equitable Life with-profits pension earlier in life that worked out badly.

Please please don't ever turn down the opportunity to join a public sector pension or you will regret it later on.

Zola.

I have a distrust of the government, especially this current government..

I'm in the private sector... 17% of my income is going into a private pension. I am 34, but the rules will more than likely change several times before I can get near it... at the moment it's 57, God knows what it will be when I think of accessing it..... 67 or later?

LookingForTheSun

One of the issues is that the benefits of the pension scheme aren't explained, I get the impression that the administrators don't even know how the scheme works. Looking at the illustration from 2015 onward it states that the scheme works by:

1. Taking 1/54 of your annual salary and putting that into a pension pot for the year.
2. Each year you get a new pension pot.
2b. The previous years (and any existing pension pots) are multiplied by 1.5% + the treasury order rate.
3. At retirement age, you take the values for each year's pot, add it up and then it gives you your pension.

I asked my administrators for a pension valuation in 30 years time, they said it's illegal to give financial advice and that they couldn't predict pay rises and treasury order rates (never mind the fact I asked them to make conservative assumptions). I then decided to build my own Excel model

Starting salary: 48,800
treasury order rate + 1.5% = 2%,
inflation = 2%
annual pay rise = 0.5%

After 30 years, inflation adjusted, gives an annual pension of £29K.
During the same period, I would have paid £126k into the pension scheme (although it's more like £100k with tax relief).

So basically, if I live for an additional 3.5 years after I retire, the pension would have paid for itself. Unless I've got my sums wrong, the NHS pension seems like a no brainer....

hugheskevi

I'm in the private sector... 17% of my income is going into a private pension. I am 34, but the rules will more than likely change several times before I can get near it... at the moment it's 57, God knows what it will be when I think of accessing it..... 67 or later?

At the moment minimum pension age is 55. The Treasury announced several years ago it would change to State Pension age minus 10 years. Your State Pension age is 68, so if it is changed your minimum pension age will become 58, plus any further increases to your State Pension age (which are quite likely).

treasury order rate + 1.5% = 2%,

The Treasury order is a measure of the change in prices, currently based on CPI. This would be therefore be 3.5%.

annual pay rise = 0.5%

Not sure there would be many left working the NHS if pay experiences real term cuts of 1.5% for the next 30 years. The Treasury assume pay increases of 4.2% p/a from 2023.

Unless I've got my sums wrong, the NHS pension seems like a no brainer....

The normal result. The assumption of 30 years of continuous service somewhat flatters the analysis, as you gain from the in-service revaluation whereas if you leave earlier you just get straight CPI.

LookingForTheSun

"Not sure there would be many left working the NHS if pay experiences real term cuts of 1.5% for the next 30 years. The Treasury assume pay increases of 4.2% p/a from 2023."

Fair enough, I wanted some conservative values that would be closer to worse case scenarios rather than optimistic values...

hugheskevi

Working fewer hours per week but for more years overall is a completely rational response to an irrational -- not to mention, unstable -- system.

Very much agree with this.

Over the last decade I've prioritised pension contributions well beyond what a normal strategy in a stable system would, simply because I want to take advantage of incentives to the maximum extent I can before they are changed. That has left my financial resources a bit imbalanced in favour of pensions. I am now pretty much sorted for the post 55 stage of my life, and cannot justify significant further voluntary pension contributions.

By choosing to work fewer hours, doing about 75% full-time equivalent, I could increase my net take home pay (calculated on a per hour basis) by 5.6%. Although that isn't a huge difference, it is quite compelling nonetheless, given I need to work fewer days overall to reach my financial goal. It doesn't seem to make much sense to work more than optimal in order to reach a position of not working at all a little sooner. Currently a move to part-time work is planned for mid-2020, after the last of some favourable voluntary pension contribution arrangements become maxed out.

But even before actually reducing hours, I've already effectively started to partially retire by not pursing progression for the last decade. When I did the calculations, the net pay for a promotion would mean that rather than work another 13 years, I would only need to work 12 at a higher level. It just wasn't worth the extra effort, I'd far prefer an easy life for 13 years than a much more stressful one for 12 years, followed by a year off. Instead I took a job at the same pay with less responsibility (which I am still doing), enabling me to enjoy a much better lifestyle overall and do things like start my own business, etc, to take advantage of different ways of receiving income.

Between 10-15 years ago, I also used unpaid leave a couple of times to go traveling. By timing my departure and return carefully, I could avoid higher rate tax in the year I left and the year I returned, which was a nice bonus. This was a noticeable increase to my net earnings per month in the year I left and came back.

Personally I can't complain about all these strange incentives in the system to manipulate, I've done well out of them, but I very much doubt have much place in an efficient and fair system.

Zola.

Are there any stats on how often the government have shifted the goal posts for lifting your pension? It is a concern I have that the money could be forever out of reach !

Malthusian

BobQ wrote: »

For the first time HM Revenue & Customs has released figures showing the total tax take from those exceeding the lifetime allowance tax has increased from £5m in 2006/07 to £102m in 2016/17.

Like I said, relatively trivial. In fact it's less than that, it's peanuts. The UK tax take is £600 billion.

A 2,000% increase from half a peanut to a bag of peanuts is still peanuts.

Headlines about "Tax break for Teresa's rich chums" are irrelevant as half the media will print the headline "Tax break for Teresa's rich chums" regardless of what is in the budget.

Malthusian

Zola. wrote: »

Are there any stats on how often the government have shifted the goal posts for lifting your pension? It is a concern I have that the money could be forever out of reach !

It has happened once in 2010 and will happen once again by 2028. So twice if you include known future legislation.

After 2028 the goalposts will be automatically linked to the State Pension Age goalposts.

There is zero chance that the money will be "forever out of reach". The government wants you to draw your pension so they can tax you on it. Hence pension freedoms. How old are you now?