NHS additional pension to offset early retirement actuarial reduction

Bravepants

I'm buying added pension in the CS Alpha scheme, also for the purposes of taking it actuarially reduced possibly from 55.


I look at it this way:

If I was to save the money into a SIPP, I would draw down at say 3% per annum during retirement; growth is not guaranteed, even such that it keeps up with inflation.


But the equivalent money into added pension, even taking it actuarially reduced by 0.543 (effect of taking at 55 compared to 67), buys me an annual sum which is equivalent to approximately 4% annual drawdown of the sum I would have otherwise saved into a SIPP, AND it is index linked (increases with inflation).


I do also save into a SIPP and S&S ISA, but as a part of a secure, definite baseline sum of money each month, the Alpha/NHS pensions are pretty good.

tibbles209

Thrugelmir wrote: »

Little point in dreaming up potential scenarios. Far better to spend ones time in focussing on what can influence and have direct control over.

In a similar vein worry about hitting the LTA when you actually get closer to it. Investments returns are an unknown quantity. If you happen to pay some additional tax by saving through a SIPP. So be it. You'll still have money available that you weren't expecting.

Never let the tail wag the dog.

Thanks Thrugelmir. I think uncertainty about what is going to happen in the future is one of the factors making this such a difficult decision.
When it comes to the LTA however, I would be at risk of hitting it if my NHS pension remains as it is now, so I could end up paying 55% tax on the entire contents of a SIPP if I opted to save there and avoid taking my NHS pension early/reduced. With the type of DB scheme that I have, if I waited until I got closer to the LTA to start worrying about it I could end up a bit stuck, because I can't just stop paying in like I could with a DC pension (well, I could but it would be mad to throw a pension like this away).

atush wrote: »

I am unconvinced that buying added years, that you take early/reduced is good value for the money.

Buying added years that you Wont take early/reduced can be a good idea.

If I bought £1000 additional pension (index linked and with dependant cover) at a cost of £3540 of my current take-home pay, and then took my pension 8 years early (at age 60 rather than 68), my reduced additional pension would be worth £656/yr gross or £520/yr take-home pension (after 21% tax). By the time I reached age 67 I would already be in slight profit, and everything thereafter would be a bonus. It is the cheapest annuity I will ever get the chance to buy.

ChopperST wrote: »

In a very similar situation. I have 13 years in the 1995 scheme and 5 in the current scheme. State pension age is 68. After much toiling I decided a SIPP was the way forward as my OH only works part time to look after our two young children I have also taken advantage of reducing my ANI to keep child benefit (appreciate you are in a different situation).

40% relief swung it for me, it also added some diversification away from the NHS pension should it change in the future. I would like to have the option of retiring at 58/60 similar to many of my peers who currently retire at 55 now on the older schemes. However I do feel that I would like to do something (just not full time) so I see the SIPP as buying me choices in my late 50's that the NHS scheme simply would not.

Good luck whatever you decide.

You are quite right about the diversification away from the NHS pension, I would be investing rather a lot into a single scheme. I would however get 40% tax relief on my additional pension purchases though.
When I do the calculations, the additional pension comes out at exceptionally good value, but it just lacks the flexibility of having a SIPP/LISA and that is worth something.

Thanks all for taking the time to reply

tibbles209

Bravepants wrote: »

I'm buying added pension in the CS Alpha scheme, also for the purposes of taking it actuarially reduced possibly from 55.


I look at it this way:

If I was to save the money into a SIPP, I would draw down at say 3% per annum during retirement; growth is not guaranteed, even such that it keeps up with inflation.


But the equivalent money into added pension, even taking it actuarially reduced by 0.543 (effect of taking at 55 compared to 67), buys me an annual sum which is equivalent to approximately 4% annual drawdown of the sum I would have otherwise saved into a SIPP, AND it is index linked (increases with inflation).


I do also save into a SIPP and S&S ISA, but as a part of a secure, definite baseline sum of money each month, the Alpha/NHS pensions are pretty good.

Bravepants thank you! It is good to hear from someone who is doing what I am thinking of doing. The numbers seem to work out really favourably when I run them and the security of guaranteed income has a lot of be said for it certainly. I would probably end up having to do a bit of saving into a LISA as a component of my retirement plan, but it is nice to hear that I'm not the only one who doesn't think this is a mad idea :rotfl:

tibbles209

So I decided to go for it, but the pension agency have told me that the max value of all additional pension products is £6500, and because of the value of my ERRBO, the maximum additional pension I can purchase is £250/yr. Ah well, that's that plan scuppered (I'm still buying the £250 though, great value). I guess that means back to LISAs, and maybe a bit in a SIPP closer to retirement when I've got more of an idea of how much room I have left in my LTA.