Pensions - Baptism of Fire

mr97

mark88man - thank you for your post.  You have outlined some great points and have given me some extremely useful information. I'm learning a great deal but it is complex so I'm going to take some time to understand my options fully.  The £3600/£2880 net thing seems to be a no brainer - almost too good to be true - but I may be showing my lack of knowledge. My thinking is I pay £2880 in a pension - over each year while I'm at uni - and it's topped up to £3600 by the Gov during the period I'm earning less than £12500 (PA). In fact, on a student loan and training grant, I will be earning less than £3600 per year re taxable income. 
I'm also thinking an isa maybe be a good idea too.  If I have the money I have to keep it someplace so an isa would be good.  I have read about the four types (one not relevant to me)  so I will research this.   This is all unfamiliar territory but I'm finding my feet slowly.  At 52yrs old I'm feeling like a grown-up lol   
I'm purposely looking at unbiased info at the mo. but I have gained some great info from a company called Hargeaves & Lansdown.  I like them and they name has popped up here on MSE a few times. 
hugheskevi  Yes, a guy I spoke with at the pension advisory service also highlighted this to me. I will make a note of this! Thank you.
RetSol - Yes, I'm like this with many aspects of my life.  I like to be neat and organised.  As you say pensions are anything but simple. Having too many pens on my desk or apps on my phone can trigger hormonal responses, how on earth will I many pension pots. lol.  
Guy's I'm literally blown away by the help you have offered me!   Last week you could have easily put everything I know about pensions and isa accounts on a postage stamp, with room to spare.  In some respects, I feel I've only scratched the surface but as with many things in life - finances included - some knowledge and guidance are so valuable.  
Have a good weekend and thanks again for all your time and effort.  

mark55man

Hi Mr97 - you are welcome.  I am not an expert, but I have had to work hard to understand, and I do seem to have a knack of explaining bigpicture stuff simply.  However, that means I am probably incomplete in my analysis and more skilled posters (eg hugheskvi's observation about buying additional final salary years) will make more specific points of help.  One of the complications with pensions is that there have been so many different schemes over the last 50 years that there are so many different individual circumstances.   As a new starter a lot of that complication doesn't apply but does make research difficult.

I don't know a lot about LISA's so you should do your own research.  I think they work as providing a 25% top up (effectively paying back the 20% of the BR tax most people would have paid).  The 25% is realisable when you get to 60 or buy a house meeting certain conditions.  So if you had a choice between LISA and pension is probably a battle between the tax advantage of the lump sum that comes with the pension, over the fact that taking money out of a pension is a bigger deal (with some consequences) than out of a LISA if you needed to reverse. HOWEVER, though you can do both, if you have enough savings to hand.  I think the LISA is £4K and the pension is £3600. 

However as other posters have thought there is little point is having an ISA and using it for cash as you have £1K interest allowance on top of your personal allowance for interest.  However if you were investing in stocks and shares it is probably best to use an ISA to start with as over 10 years (especially when earning) you will build up enough that you might appreciate the tax free benefits (income tax on income and capital gains tax on growth), and the sooner you start using them, the less likely you are end up with a bunch of money outside the ISA that you can't then do anything with.  So its a precaution that doesn't really cost anything, but could save later.  

mr97

mark88man  thank you.  Re. (eg hugheskvi's observation about buying additional final salary years) I'm not really sure what this means. I did Google 'buying final salary' but I think it may be a term for something.  ...I have a lot to learn. lol
I think the £3600 pension route looks a good option for me as I'm too old for a LISA.  I'm hoping to start something while I'm at university with a view to a works pension at some point in the future (3yrs).  Hopefully, if I manage to realise my dream and become a nurse, it will be an NHS pension.  
Stocks&Shares isa is something I'm going to look into. My lack of understanding about such investments; fear and uncertainty has always caused to stick to online saver type accounts.  I'm determined to be brave this year.     

hugheskevi

mr97 said:

mark88man  thank you.  Re. (eg hugheskvi's observation about buying additional final salary years) I'm not really sure what this means. I did Google 'buying final salary' but I think it may be a term for something.  ...I have a lot to learn. lol

You would be receiving a credit of pension benefits under the post-2015 NHS pension scheme through a transfer-in of an external pension, to use technical jargon.

There used to be a facility for members to purchase Added Years, but that ended back around 2010 and was replaced by something called Added Pension.

You can read more about transfer-in at this link if you are interested.

mr97

hugheskevi - thank you.  There's a lot of tech jargon and terms used that I'm now starting to understand albeit slowly.  It was a nightmare when I first started researching - like learning a new language.  Not being used to having money I find it all quite stressful but I guess this is understandable too.  

crv1963

mr97- Well done to you and for grasping the pension nettle as well. I have a few observations that may help-
1) Only worry about things you can control.
2) Do contribute the 2880 pa into some sort of pension- all the little pots add up over time.
3) When you start training most student nurses work some shifts a month on the Trust Nurse Bank as HCAs- do tick the box to contribute to the NHS Pension, get started asap with the contributions as said earlier they add up.
4) When you qualify definitely join the NHS Pension, read the info you'll be sent, you will also have access to your Trust Pension Officer who cannot offer advice on what to do but can explain options and consequences of choices to help you decide what you want to do.

I'm coming to the end of my career but advise (if asked) more junior colleagues to try to save into another pension as well as the NHS Scheme- for added choices when they are older/ nearing retirement. For myself I contributed to NHS Pension, and AVC, now opened a SIPP- I've been planning a long time. We're having to save aggressively into Mrs CRV Pension to get a balance in retirement so if there's a Mrs(or Mr)97 look at it as a joint venture.

Good luck with the training and the financial planning.

mark55man

To complement the link that hugheskevi posted - I found
https://www.nhsbsa.nhs.uk/sites/default/files/2019-09/Added%20Benefits-Additional%20Pension%20factsheet-20190903-%28V8%29%20%20%20%20%20%20%20%20.pdf

Also a calculator http://www.nhspensions.nhsbsa.nhs.uk/PensionCalculators/AdditionalPension/index.aspx

I tried the calculator and to add £1k of pension you would need to pay about £16K (no dependent cover) - which you can do over installments.  Usually questions on this board are about how much income to give up in exchange for a lump sum (ie the other way around).  The answer there is based on the commutation factor ie how many ££££ you get for each £ given up.  The answer is normally if that is less than 20 you shouldn't do it (ie taking the lump sum is not good value).  By implication (you are going the other way) that means £1 income for £16 contribution seems like a pretty good deal for you.  Also in your personal circumstances (ie relatively short time to retirement, anxiety and MH issues (however much you seem to be coping now, and just general certainty) I think this would be a very good plan.  You seem to be able to add up to £6500 per year as income (ie that's the limit).  If you added that to the £14K we were already talking about then £20K a year is a more comfortable retirement pension

As always though you can do an element of both, no reason why you couldn't invest  your £3600 cautiously in a pension and the transfer it over (ie when you finish uni), and or as an ongoing decision on how to invest your salary.  Normally transfer in's have to be done in the first 12 months, but it seems the additional salary scheme is open as a general mechanism so long as you are working (ie not ill).  So you could try investing your money whilst at Uni to see  if you like it, and then choose to transfer and build you guaranteed income.

You should never take advice or guidance from people on the internet, but I think you can't go to far wrong by focusing your attention on building up your benefits from the NHS pension (ie working out what amount of money you think you need to retire on) then whether you do that by a lump sum now, or gradually contributing from your earned income then both end up well.  The vast majority of people on this board are looking at how to secure income and you have a cast iron (for now) way of doing so. 

EDITED TO ADD: Just seen what crv1963 posted while I was writing.  Can't beat suggestions from someone who worked on the same scheme as you!!.  One trouble with putting all your eggs in the NHS basket is that you are limited by the scheme rules at the end of it.  For example is you needed to leave early it might be nice to have a side pot to give you some flexibility

mr97

CRV1963-  Thank you.  Starting and contributing 2880 pa into some sort of pension pot seems to be a great option. And, something I can control.  This will be my first step.  I have been worrying about this stuff.  Generally, I try to stay present and focus on matters at hand but I'm finding it very easy to mentally become fixated on the future.  Mentally planning too far ahead only, at best, seems to produce anxiety rather than comfort.  I'm not entirely sure how my course content will be delivered this year. lol  Great idea re. ticking the box to contribute to the NHS Pension when I have any !!!!!! etc.   There is a lot of options and the fact that if/when I'm working, I will get to speak with someone from the trust re NHS pension.  I think for the moment I will step-back a little and focus on the immediate future ie 2880 pension p.a. 
Sounds like you have been very busy in the pension dept too.  I wish all the very best with your ventures 
Thank you very much for your time and effort.

crv1963

mr97 said:

CRV1963-  Thank you.  Starting and contributing 2880 pa into some sort of pension pot seems to be a great option. And, something I can control.  This will be my first step.  I have been worrying about this stuff.  Generally, I try to stay present and focus on matters at hand but I'm finding it very easy to mentally become fixated on the future.  Mentally planning too far ahead only, at best, seems to produce anxiety rather than comfort.  I'm not entirely sure how my course content will be delivered this year. lol  Great idea re. ticking the box to contribute to the NHS Pension when I have any !!!!!! etc.   There is a lot of options and the fact that if/when I'm working, I will get to speak with someone from the trust re NHS pension.  I think for the moment I will step-back a little and focus on the immediate future ie 2880 pension p.a. 
Sounds like you have been very busy in the pension dept too.  I wish all the very best with your ventures 
Thank you very much for your time and effort.

mr97- 

Don't worry about it all, stay grounded
1) By thinking, asking and now deciding to do something about your pension you are ahead of the majority!
2) Form a loose plan for the future and allow yourself the knowledge that the plan may change as long as the journey gets you where you want to be eventually any detours/ hold ups aren't the end of the world. I had planned retiring at 55, but life, events and changing needs altered that!
3) How the course is delivered is beyond your control so not your worry- just do what you need to in order to complete the work.

Another piece of advice I always pass on to others is to always have two nice things planned for the future- be that holidays, days out or nights out (whatever floats your boat). That way when you have done a nice/ enjoyable thing you don't get "the blues" because you have the next thing to look forward to. It doesn't have to be an expensive thing, just a thing!

mr97

mark88man - thank you so much. The links provided has given me some good info. 
I really want a degree of financial security when I retire so I could perhaps travel but really just being able to eat well, have coffees and be in a position to save for holidays etc is appealing, when I do retire.  I'm still going to travel and enjoy my life now but I'm sensible.  Generally, I have a fairly balanced approach to living and budgeting but the big picture is always in sight. 
The £3600 pension pa each year is most doable for me and I really think it will be positive steps in the right direction as even when I'm working I can decide to transfer it.  I will digest the info you provided via the links. It's still confusing to me but I do see a picture emerging.  Tax and personal allowance is another area I'm trying to grasp as taking shifts - if this is an option during uni -  will need to be factored in, however, having chatted with a friend who completed the nursing degree, he found it impossible.  The workload is very high due to placement hours required making the 50/50 theory/placement spilt quite involved and intense. I'm ok re. my MH at the moment, however, I do need to be careful with myself.  Some traits are always near the surface meaning I very prone to emotional triggers - stuff many of us have to live with - I just find I need to take stock perhaps a little more than most people. Strange, but I'm quite resilient in certain areas of life but some situations can really be prone to becoming unwell.  
Thank you for highlighting the point about online information and guidance. 
 Have good one mark88man, you have been very generous with your time,  I was really nervous about asking for help and I'm so glad I did. Much appreciated