NHS MPAVC or SIPP?

nemoes

Hello!

Does anybody have any experience of making Money Purchase AVCs as part of the NHS pension scheme?

Am I right in thinking that as well as the tax relief, as the contribution is taken at source, national insurance is alos not paid - so instead of 40% tax relief as a higher rate tax payer the benefit is actually 52% when the NI is included?

Standard Life and Prudential both have offerings as part of the scheme - which I understand is with specially negotiated rates for the NHS? I haven't been able to find the details for these online does anyone know what they are? I'm keen to keep my fees as low as I can.

Both SL and Pru offer a flexible range of funds to invest in - passive and active e.g. Blackrock and Vanguard Trackers as examples.

Overall it would seem that MPAVCs offer a slight advantage over a SIPP due to the contribution being deducted at source and avoiding Tax and NI contributions.

Is this correct or am I missing some other factors I haven't considered?

Thanks.

xylophone

Unless there's a salary sacrifice arrangement there is no NI saving.

Pension contributions in a net pay scheme are taken before tax but NI is assessed on gross pay.

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim02365

tibbles209

NHS AVCs are not salsac, so you don't save your national insurance contributions (which are 2% on the proportion of your pay in the higher rate tax bracket by the way, not 12%). There is not any great advantage that I can see in paying into NHS AVCs rather than a personal pension, beyond the convenience of it being taken directly from your pay, thus saving you having to separately claim for the higher rate tax relief component.
NHS Additional Pension however is very good value and worth looking into, although it depends what you are trying to achieve. Additional Pension is a good idea if you are looking to increase the value of your pension from normal retirement age. A personal pension may be more appropriate however if you are looking to bridge a gap between retirement to your NHS pension age.

nemoes

Thanks for those clarifications. I'm looking to retire earlier than 67 (SP age for me at the moment) so am planning to build a seperate personal pension that I can draw down when I hit 59 or 60. I have a good number of years in my existing works pensions and a number of years of contributions (hopefully) yet to go so less worried about the final value of my main pension and more about bridging the gap if and when I go early.

Nurse2047

@nemoes did you apply for the AVC in the end? 

TVAS

Why haven't you phoned up the scheme and asked them? There are advantages of and disadvantages. Advantages taken from net pay, low charges, if you build up a large fund tax tax free cash from the AVC rather than the main pension if the commutation rate is below a factor of 20. This means you give up £1 pension for £20 cash. Lower than 20 is deemed to be poor value i.e. you are giving up more pension so a factor of 12 which is the NHS is crap! Advantages of a SIPP can take independently of NHS pension could be good to use as a bridge income between taking early retirement and taking the NHS pension scheme at the scheme retirement age. Disadvantages you bear the risk and the cost will be higher although you can get those funds you mentioned Vanguard, Blackrock in a SIPP. It is much better to make the effort yourself (calling the NHS Pension Scheme) and finding our for yourself as you will enhance your understanding.