Civil Service/NEST/NHS Pension

Poppycat1

Today I received my Civil Service Pension forecast. I have never been and never will be a high earner or spender. Here are my figures:

£3,623 pa Civil Service pension at 60
£10,870 Civil Service lump sum

£633 total pension pot NEST Ethical growth fund (part-time job, no longer contributing)

£250 pa NHS pension - Started contributing March 2017 - planning to stay - paid at 67/68

The reason for the small amount of pension is that for the past 12 years I have mainly been a stay at home Mum. This means because of protected NI contributions I only have a couple of years left to be entitled to a full state pension at 67/68.

I have a mortgage of approximately £107,000. I am nearly 48. My income with maintenance/wages/benefits are approx. £25,000 pa. I save around 50%, last year it went on the mortgage over payments. This year I plan to save/invest the 50%.

Any advice? I would like to start contributing more to my retirement but not sure how. Adding extra money to my NEST account is easy but I'm not sure it's the best option.

moo121

Poppycat what age are you hoping to retire by? Potentially you've got another 20 years to build up further NHS pension benefit so traditional savings and paying off your mortgage, whilst not being so tax efficient, would provide a degree of security.

Your current level of spending seems to indicate you are well on track to having sufficient in pensions for this at 67/68 but if you want to retire earlier you'll need a rethink.

claire111

Poppycat - consider purchasing NHS Additional Pension. This is different from AVC's and is a type of Annuity. Its not for everyone so do your sums, but counts as pension contributions from a tax perspective and the terms are considered favourable by many. You can get quotes on the NHS website.

Poppycat1

Thanks for replying Moo. I have just taken steps to make my job future proof by applying to change from nursing to an admin role within the NHS. But I would like to retire around the age the civil service pension is payable at 60.

For several years I was overpaying the mortgage but with an interest rate of 1.99% that seems unwise now. I have now opened a couple of accounts paying 5% and a S&S ISA which I pay in £250 each month (Vanguard 80%). I will change this to £500 once the 5% accounts are full unless I find something better to do with it.

Poppycat1

Thanks Claire, I must admit that I have only just got to grips with the basics of the NHS pension. I have just been to the website and read up on Additional pension. Am I right in my understanding that it pays out at the same time as your SP?

planteria

it's clear that you are only just getting your head around your retirement plans, but you are approaching it well and receiving some good pointers above.

understanding the NHS pension and how to efficiently increase your benefits from that is essential. beyond that, if you are looking to invest in an additional private pension, i think you'll find that there are better options than Nest: and transfering your small Nest pot into the better option you find will probably make sense.

Dazed_and_confused

My income with maintenance/wages/benefits are approx. £25,000 pa.

You need to consider your taxable income when it comes to looking at the tax efficiency of purchasing additional NHS pension.

If your taxable salary is currently say £12,000 and you get the standard Personal Allowance and have no other taxable income of note then there may be tax relief available to you.

Not necessarily a reason not to do it but something to consider.

If your salary is a much greater proportion of the £25k then that would be different.

Poppycat1

Thank you Planteria and Dazed for being gentle with me.

Although NEST is very easy to use and understand I didn't think it was the best option but wasn't sure.

I think with my civil service pension and state pension I will be fine at 67/68. Just need to find somewhere to put any spare money so I can leave a bit earlier.

At the moment I work part-time and earn around £12,000. The rest is maintenance and benefits. I should be going full-time with a salary of £17,500 in the next couple of months. This will reduce the benefits so income will be approximately the same.

Off to investigate SIPPs.

Dazed_and_confused

On £17,500 (for a full tax year) you will be paying approx £1k in tax (or a bit less if Scottish resident for tax purposes) so additional NHS pension would possibly reduce this.

A SIPP won't save you any income tax but would result in basic rate tax relief being added to the pension fund.

Thrugelmir

How will your ability to repay the mortgage be impacted by the loss of benefits\maintenance? £107k is a sizable level of debt on your level of income with dependents to support.