NHS Penion vs Investment ISA: please educate me

Stubod

..if you are in the NHS and thinking of quitting the pension offered then you probably need some help from one of your colleagues in the NHS mental health department....(IMHO)

Nurse2047

If you pay into the NHS AVC via Pru or standard life payments are taken from your pay before tax, so the money you’d normally pay as Income Tax will automatically go into your AVC pot instead. If you pay tax at a higher rate, your tax savings will be higher.
Additional payments you can buy up to £6500 extra pension each year in installments or lump sums. If you buy Additional Pension with cover for dependants, each £250 unit of Additional Pension also increases your partner’s adult dependant’s pension by £93.75 a year. In the case of a children’s pension, the increase is £187.50 a year to be distributed according to the rules of that benefit.
 https://www.nhsbsa.nhs.uk/sites/default/files/2019-09/Added Benefits-Additional Pension factsheet-20190903-(V8) .pdf

hugheskevi

prb1984 said:

hugheskevi said:

prb1984 said:

So that's all really clear, the consensus is to not opt-out but to stay in and in vest in an ISA additionally.

Agree with the first point, not necessarily with the second.

Why have personal pension contributions in particular not been considered? Why an ISA? An ISA may well be right initially, but would there be a point at which you may wish to switch to a personal pension, eg, when paying higher rate tax? Would you be planning to use a LISA, stocks and shares ISA or both?

So additional NHSpension contributions beyond what I'm already contributing, is that what you mean? Can you explain why that would be beneficial please?

The focus was on a stocks and shares ISA due to accessibility - as mentioend I don't want to work until standard retirement age, and the solutions you mentioned all lock money away until such a time, do they not? I may misunderstand them.
The goal is to retire early and not have to work full time until retirement age.

No, personal pension contributions. Additional NHS contributions are one possibility (of the 6 I listed initially):

• ERRBO
• Added Pension
• AVC
• Personal pension (including SIPPs) - noting that new arrangements are likely to have a minimum pension age of 57.
  
• Stocks and shares ISA
• Lifetime ISA

You should ensure you understand each type of investment available, and not just leap to a final conclusion - understanding why you do not want a type of investment is important in understanding what you do want (and why).

Personal pensions can invest in the same things as an ISA, and are accessible from (subject to consultation) age 57. For income required between age 57 and State Pension age, it is likely a personal pension would be better than an ISA due to the tax benefits. However, as you currently only benefit from basic rate relief, it may be better to wait until you can benefit from higher rate relief on extra contributions.

Even with early retirement, you will be wanting to smooth income throughout early retirement until NHS and State Pension come into payment . There are many ways to do that, and a personal pension is probably going to feature in most plans, as well as probably an ISA. Higher NHS pension contributions could also play a role, but that is less clearcut than the role a personal pension is likely to be able to play.

prb1984

Stubod said:

..if you are in the NHS and thinking of quitting the pension offered then you probably need some help from one of your colleagues in the NHS mental health department....(IMHO)

I'm an NHS doctor in mental health. Trying to understand the complicated world of finance and pensions. Comments like yours are part of why there is so much stigma around mental health - conflating someone doing something you don't think is a good idea, with a mental health problem (perhaps to try and make what you percieve to be a witty point on an online forum to impress strangers?). Quite ridiculous and ignorant really. Hopefully you'll have a look at yourself and think twice about making comments like that, you probably won't. 

Nurse2047

You can buy out the reduction that would apply if you claimed your NHS pension before your normal pension age.
https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/early-retirement-reduction-buy-out-errbo

prb1984

MFW2026 said:

If you pay into the NHS AVC via Pru or standard life payments are taken from your pay before tax, so the money you’d normally pay as Income Tax will automatically go into your AVC pot instead. If you pay tax at a higher rate, your tax savings will be higher.
Additional payments you can buy up to £6500 extra pension each year in installments or lump sums. If you buy Additional Pension with cover for dependants, each £250 unit of Additional Pension also increases your partner’s adult dependant’s pension by £93.75 a year. In the case of a children’s pension, the increase is £187.50 a year to be distributed according to the rules of that benefit.
 https://www.nhsbsa.nhs.uk/sites/default/files/2019-09/Added Benefits-Additional Pension factsheet-20190903-(V8) .pdf

Interesting, thank you for that MFW, I was unaware, I'll look into it.

Thrugelmir

Will you have cleared your mortgage by the time you plan to retire? 

Nurse2047

You can access the AVC at age 55 also https://www.pru.co.uk/rz/nhs/

prb1984

Thrugelmir said:

Will you have cleared your mortgage by the time you plan to retire? 

Yes, how fast depends on if putting into something else makes more sense. There's 190k left around 2.45% now. Could pay this off within about 5 to 7 years quickest, without putting money into anything else.

prb1984

hugheskevi said:
No, personal pension contributions. Additional NHS contributions are one possibility (of the 6 I listed initially):

• ERRBO
• Added Pension
• AVC
• Personal pension (including SIPPs) - noting that new arrangements are likely to have a minimum pension age of 57.
  
• Stocks and shares ISA
• Lifetime ISA

You should ensure you understand each type of investment available, and not just leap to a final conclusion - understanding why you do not want a type of investment is important in understanding what you do want (and why).

Personal pensions can invest in the same things as an ISA, and are accessible from (subject to consultation) age 57. For income required between age 57 and State Pension age, it is likely a personal pension would be better than an ISA due to the tax benefits. However, as you currently only benefit from basic rate relief, it may be better to wait until you can benefit from higher rate relief on extra contributions.

Even with early retirement, you will be wanting to smooth income throughout early retirement until NHS and State Pension come into payment . There are many ways to do that, and a personal pension is probably going to feature in most plans, as well as probably an ISA. Higher NHS pension contributions could also play a role, but that is less clearcut than the role a personal pension is likely to be able to play.

Yes I'll look into these and research them, that's great thanks. I did look into LISA, although I understand that this is only drawable after 60. Given that I'm thinking my NHS pension will cover my income post retirement age, the stuff I was looking to put money in now is stuff that I can access earlier to cover that period before retirement age. One concern is the ever increasing age of a drawing the pension for a lot of these options - given the increasing lifespan and burden of support in later life, I can only forsee this trend continuing.
Sorry to ask another question, but when would I be benefiting from the higher rate relief on extra contributions? Is this when earning at least the additional contribution over the higher tax rate limit?
I should have lots of opportunities for income to fill the gap between semi-retirement and and recieving state and NHS pension - in my field there's lots of scope for part-time work, locuming, private work that I could increase/decrease as needed.