Pros and cons of coming out of NHS pension

am.jovial

What are the pros and cons of coming out of NHS pensions and joining private Pensions?

As per this article, my understanding is, NHS pension is better than private ones:
Why are NHS staff quitting generous pensions at an alarming rate - and what are the benefits of sticking with the scheme?

Do private pension funds invest in efficient investment instruments and earn enough to compensate for Government contribution of (more than 14%) ? Looks too good to be true.

sammyjammy

There is no one size fits all when it comes to private pensions and their investments, each will be different, some will be better than others. Generally speaking you would have to be mad to not join/be in NHS pension, nothing stopping you having a private pension as well.

SonOf

What are the pros and cons of coming out of NHS pensions and joining private Pensions?

Pros - NONE
Negatives - it will cost you around a third of your salary to match the benefits.

Caveat: There is an extremely small percentage of people (probably under 1%) who may be better off not being the NHS pension for tax reasons.

As per this article, my understanding is, NHS pension is better than private ones:

The NHS is notorious for misinformation in the workplace on pensions. Often put about by trade union reps and other mischief-makers. It is probably the worst workplace in the country for it.

It would nearly always be a missale for an adviser to tell someone not to be in the NHS pension and use a personal pension instead. For the 99%, it is simply the wrong thing to do by not joining.

sandsy

For a very small number of higher earners in the NHS undertaking extra shifts, the increase in the value of pension benefits earned can result in a significant tax bill.

For the vast majority of NHS workers, the NHS pension scheme is the envy of most people with private defined contribution pensions.

nigelbb

The NHS pension scheme is effectively deferred salary paid in retirement. It amounts to an inflation proofed extra 40-50% on top of salary.

JoeCrystal

am.jovial wrote: »

What are the pros and cons of coming out of NHS pensions and joining private Pensions?

As per this article, my understanding is, NHS pension is better than private ones:
Why are NHS staff quitting generous pensions at an alarming rate - and what are the benefits of sticking with the scheme?

Do private pension funds invest in efficient investment instruments and earn enough to compensate for Government contribution of (more than 14%) ? Looks too good to be true.

NHS pension is not merely better than privates ones. It is a lot better than standard auto-enrolled DC pension schemes in the private sector. To see how strikingly different it is, let say you are a 21 years old NHS staff on £18,000 a year and the accrual rate is 1/54 of your earnings in that year. You work for the NHS for 47 years and retire at 68 (and assuming your salary is only maintained at the real value for the entire term), the NHS pension scheme will pay you an index-linked income of £15,666 per year for the rest of your life plus spousal income. You only pay 5.6% of your salary for this benefit or £84 per month. However, as long as you are an active member, your accrued earning would maintain its real value plus 1.5% on top so it would be significantly higher than £15,666 per year anyway.

If a 21 years old person on £18k wants to save up for £15,666 per year index-linked annuity by 68, then a contribution £540 per month or 36% of the salary would be needed. Assuming a drawdown pot at 4% withdrawal is necessary rather than an annuity, then it would still require a quarter of the wage instead.

The NHS employees are paying peanuts for the benefits they would get out of the NHS pension scheme. And we barely touch on the pensions for their spouses, their children, death in service and ill-health retirements as well.

hyubh

JoeCrystal wrote: »

To see how strikingly different it is, let say you are a 21 years old NHS staff on £18,000 a year and the accrual rate is 1/54 of your earnings in that year. You work for the NHS for 47 years and retire at 68 (and assuming your salary is only maintained at the real value for the entire term), the NHS pension scheme will pay you an index-linked income of £15,666 per year for the rest of your life plus spousal income.

Actually, it's better than that, because the revaluation rate for active members is CPI + 1.5%.

flea72

staff are not leaving nhs pension schemes to pay into private ones. They are leaving them because its a big chunk of your pay. I agree with the article, in the naivety of the youth, as retirement is so far off and they want access to the money now. Many colleagues i speak to who are under 35, and have opted out, think they are better off saving the money towards a house deposit, and will rejoin the scheme once they are settled. However, for many i think it will slip their mind, or they then delay it again, as they now have kids or want to move house, etc, when you ask them why they are turning down free money/additional pay, they are confused, as they dont realise their employer pays in too.

Flugelhorn

I left the scheme as I was about to breach the lifetime allowance and at risk of tax bills ++ under the annual allowance. I took the pension 2 years later. Brilliant scheme.

badmemory

Flugelhorn wrote: »

I left the scheme as I was about to breach the lifetime allowance and at risk of tax bills ++ under the annual allowance. I took the pension 2 years later. Brilliant scheme.

I am sure you did the right thing when YOU did it. But would you have done it 20 years ago? No thought not!

FtbDreaming

I doubt people are leaving to pay into a private pension... they are leaving because they cant afford to pay into it. I opted out when I got my first job, 2 years later when I went back to NHS I've decided to stay in.

Ive spoken to too many nurses that opted out when their kids were younger as they couldnt afford it. Now they're old and cant afford to retire. Then there are load more who've paid in for their full career and now living a nice life with early or flexi retirement on the cards.