Working after 60 in nhs 1995 schemee

lynnvb

I will reach npa of 60 early next year. All pension is in 1995 nhs scheme. I need to stay working for another 12 months.. But my understanding is that if I continue in my role and do not take my pension via retire and return but defer it I effectively loose 1 years pension payments as there is no enhancement for taking pension late. I see little value in paying  14% contributions if I remain in the scheme for another year as will not return will not equal my contributions which over the year would be around 6500.  I would simply not gain anywhere near that in pension gain. Is my only option to retire and return? I would be able to keep my current job but pension and salary would move me to 40% tax bracket . Then I guess I just reinvest my monthly pension income as not required at present for day to day living?
Any thoughts?

zagubov

Some other posters may be more familiar with the nhs pension. If you do return to work, there are rules about not working for a day then working on a reduced number of hours for at least a month before returning to full-time work (be aware that the Corona Act might mean that the reduced hours part may still be suspended when you retire). Doing agency work or working in the private sector may avoid having to jump through these hoops, but I'm not an expert in this area.
Whatever you do, you may have to then pay into a different pension in your new job.
When re-employed and drawing your pension you may want to pay extra into a new pension to reduce your tax bill below the 40% tax threshhold.
Your union rep or HR department may have more info. I'd ask them in that order.

crv1963

lynnvb said:

Any thoughts?

There are a number of choices. The rules about limiting hours worked in the first few months from retirement have been changed under the Emergency Powers Corona-virus Act. The only rule you need to be aware of is you must have a 24 hour break in service. Have a conversation with HR and/or your manager. I had already given notice of my retirement and had planned to return part time within the limits of the old rules when Covid-19 hit the world. 

I was asked 1) to consider not retiring but delay it or 2) retire, have a 24 hour break and then return to same role, same team. So I retired 30 April and was re-employed 2 May, full time plus overtime, in fact my first return shift was an overtime one.

Then there's the tax position- ft pay+ pension pushes me into HRT bracket and over time pushes me deeper into it. As I already had planned a return part time I already had planned to start a SIPP. The beginning of June after my pension and pay landed into my account I rang HL (there are other choices but that's a different debate) and opened a SIPP. It was totally uncomplicated and took 15 minutes! My base contribution is equal to almost the whole of my pension income, although of course we live off the pension and save the earnings.

My intention is to contribute my base amount monthly and add on an ad hoc basis my overtime and enhanced hours income, so that clears all my HRT earnings into my pension but stays within the pension contribution limits. I also am staying in the NEST scheme that you are automatically enrolled into as a returnee, because otherwise I'd miss out on the Employer contribution and when I finally do retire I am going to transfer the NEST pot into the SIPP pot. 

Finally as a HRT payer at some point I will either get a tax rebate for the remaining 20% tax or an amended tax code (hoping for the latter) and that amount will go into my wife SIPP to boost her pot and will be drawn tax free within her personal allowance. Whereas as I am already taxed on my pension anything I draw from my SIPP will be taxed at 20% after taking the TFLS from the SIPP.

I'd say go for it, I personally have never worked as many paid hours as I do now and even if you don't put all your HRT earnings into a SIPP 60% of some earnings is better than 100% of no earnings. 

Good Luck it really is easy to set up.

Edit- all my pension is 1995 scheme I have 42/80ths, so you could check how many years you have as you may add 2/80 for every year you work past NRA for the scheme.

lynnvb

Thanks great idea about Sipps. You mention staying on in 1995 scheme but ti me it seems little gain for 14% contributions around £6000 a year. Think retire and return is worth looking at now 

crv1963

I took the decision to retire and return in January with the idea of working part time in my current Team and agency somewhere else but events overtook my plans and the chance to return full time in my existing post arose. I was employed on the same increment and that might be worth clarifying before you agree to return. I also took the view when I decided to go that having the pension in payment was worth more overall than hanging on until I hit the 45/80 point. The money I'm saving into my SIPP I intend to draw down at or around the same annual rate as my SP will be so smoothing my retirement income at a constant level.

I also took the view that the larger TFLS was worth the poor 12:1 exchange, I know there is some advice to take the larger pension and smaller TFLS but you have to look at your own circumstances/ savings/ debts/ outgoings. Also if you have one your partners retirement plans/ income. 

It is also very liberating knowing that if all the organisational changes or direction makes you fed up you can simply say "no thank you, I'll go elsewhere" knowing you still have a reasonable back up income.

Good luck.

Thrugelmir

Under the 1995 scheme you can accrue up to 45 years service. No neccessity to draw the pension at 60. 

lynnvb

That was my first thought but the rate the pension increases is around £600 a year. My contributions are £6000 a year. There is no increasing pension if I take this pension late. Therefore I am missing out on £12000 a year payment (gross) plus £6000 in will pay in still. OR have I got this completely  wrong?. I am pretty sure I will be able to retire and return. Get my current banding and take pension .
Why is it so confusing???

crv1963

lynnvb said:

That was my first thought but the rate the pension increases is around £600 a year. My contributions are £6000 a year. There is no increasing pension if I take this pension late. Therefore I am missing out on £12000 a year payment (gross) plus £6000 in will pay in still. OR have I got this completely  wrong?. I am pretty sure I will be able to retire and return. Get my current banding and take pension .
Why is it so confusing???

The facts are straight forward but the decision is complex because it is trading certainty for a new future, any change provokes reactions internally and with others. The best you can do is look at all the options- I wrote them down in a list-

Current income                                       Retirement Income                                            Pension plus wage
£x plus enhancements=                          £y plus part time=                                               £x + £y= 
Just into HRT, save in a                          Covers basics                                                     HRT, better savings for retirement
SIPP  continue with current                    More time to do as I please                                Mitigate by saving £y into SIPP
work/ life balance=retire later                                                                                             use extra to save into wife SIPP=
slightly bigger pension.                                                                                                      more comfortable joint retirement. 
I then discussed with Mrs CRV and decided to go with the pension plus wage and have a larger retirement income overall- my SIPP will be drawn down probably to zero by dividing the pot size by however many years it is until my SP starts when I finally stop work.  As I don't expect it to be a huge sum of money but large enough to add a decent amount to our overall income, although I am mindful that whatever I do I will be a BR taxpayer whereas Mrs CRV will not be a taxpayer until I kick the bucket and she gets the survivor pension.
I also am clear in my own mind that I'm trading time for money- it is trying to reach a balance of how much is enough and when that point is reached being brave enough to not get sucked into the "one more year circus".

lynnvb

It certainly can be a circus!
Pension and income sounds preferable and probably financially more beneficial. Definately hadnt thought about Sipps so will take tgat advice. Thanks

Thrugelmir

lynnvb said:

That was my first thought but the rate the pension increases is around £600 a year. My contributions are £6000 a year. There is no increasing pension if I take this pension late. Therefore I am missing out on £12000 a year payment (gross) plus £6000 in will pay in still. OR have I got this completely  wrong?. I am pretty sure I will be able to retire and return. Get my current banding and take pension .
Why is it so confusing???

As long as you are working your accrued pension continues to grow by CPI plus 1.6% per annum. This is addition to the pension entitlement that you earn in the current year. The 3 times tax free lump sum correspondingly increases. 
Compounding is your friend as the years pass the rate of growth increases.