FIREside Chats

D123456789

So I have found my total rewards statement for Nhs pension.

I had a final salary scheme until 2015 and I can access this age 60. 

i have a different scheme from 2015 which I can access age 67. This has less money in it but then it has been going for fewer years and now I work part time.

I can access the state pension aged 67 but this may be a moving goal post? I need 10 more years NI payments to get this full state pension (at present) 

I expect to work another 10 years so extra will go into my nhs pension. Then I will need to find some money to live on until I get my first pension at 60. 

Not sure how much the lump sum will change over 10 more years. 

Thankyou to everyone I have found out information that I wouldn’t have known about. I am still trying to process it all.

becky_rtw

D123456789 you can draw both the 1995 and 2015 schemes early if you need to, but they are subject to early repayment penalties. 

There may be reasons for doing though that work for you. Min age is 55. If you are looking to "bridge the gap" then it can be worth exploring this. 

The 2015 scheme has no lump sum. I dont know if you need to take both at the same time if you go early, I'd expect you might be subject to some rules on this. 

becky_rtw

Actually on looking for some it can be 50:
https://www.nhsbsa.nhs.uk/member-hub/applying-your-pension

There are some tables of the reduction amounts in the factsheet on the page as well if that helps

edinburgher

I used to think that the reduction factors were crazy on my LG pension scheme (for example, something like half if I take it at 55). But then I spoke with my Dad, who did exactly this and spoke about the difference between having half your money and all your health and all your money and failing health 15 years later. It made a lot of sense That said, I suspect the fact that he owns four MF houses makes him feel more relaxed than most about needing more money later in life Still, the difference between half the money for 25 years and all of it for 12 (for example) makes it seem almost sensible...

Suffolk_lass

Yes, the actuarial reduction is still calculated at approximately 5% per year.

The other thing to explore is whether your employer offers (or could offer you) partial retirement - we had a number of people who did the maths and took a lump sum and small income from an actuarially reduced pension and continued working (and accruing pension at the pro-rata rate) until their planned retirement date - so only part was actuarially reduced but the benefit of the lump sum permitted things like paying off (or down) the mortgage early, and the extra time reduced work costs and got them adjusting to stopping work. It meant they continued to pay NI contributions too, but only on the salary part, so at a reduced level. I believe the limitation is that you could not receive more in pension plus salary than you could had you continued full time. I believe you can toggle your assumed lump sum too, up to 25% of the pot value, and reduce the income, should you find this better suits your needs

powerspowers

Oooh unexpected bonus, work is moving over to a salary sacrifice scheme for AVCs so I think I’ll be ~£20pm better off, which I’ll either reinvest in the AVCs or offset against the NI increase. Give with one hand, take with the over 🙄

Scrimps

I have my NHS pension figures from the calculator I used. Looking at the guidance notes this is at todays value as it assumes revaluation in line with inflation, it also assumes actuarial reduction at todays rate - so that could increase or decrease.  I think when I looked at this before, I didnt realise that the actuarial reduction wasnt already factored in, so it is better than I thought previously.   I have kept the assumption at working a 4 day week (80% of full time).  My husbands NHS pension would be about the same.

https://pensions.gov.scot/nhs/your-membership/calculators/nhs-pension-calculator

Normal age for me would be 68. Retirement date would be 2050 if I worked right till then.  I will be 60 in 2042.  If rules stay the same () I could technically early retire at 58

2050 No lump sum: £27,5k per annum
£120k max lump sum : £17.5k per annum

2045 no lump sum: £17k p/a
£75k max lump sum: £11k p/a

2042 no lump sum: £13k p/a
£56k max lump sum: £8.5k p/a

2040 no lump sum: £11k p/a
£47k max lump sum: £7k p/a

I would get advice closer to the time about taking lump sum vs not, depending on how health is, how my LISA and SIPP perform etc would likely answer that one.  Any thing else jumps out at you?

To recap: My sipp & LISA currently at around £55k, husbands at around £70k, we contribute £200 each per month pre-tax uplift.  I previously worked on an assumed 7% annualised growth which I now realise was optimistic?  and calculated that if we kept our contributions the same for the next 18 years we would have about £600k invested between us (not inflation adjusted)  as well as the above to bridge us until our state pension kicked in. We would need about £24k a year in todays money to be comfortable and a lump sum in the bank for large expenses. We both worked without a gap since age 18 so have full NI years.

it seems to me that we could retire as soon as we could access our pensions? Unless Im missing something, we need to start with a S&S isa and possibly bring that retirement date forward?

hugheskevi

Scrimps said:

I have my NHS pension figures from the calculator I used. Looking at the guidance notes this is at todays value as it assumes revaluation in line with inflation...We would need about £24k a year in todays money to be comfortable

When looking over the long-term, it can be dangerous to work in today's money terms. Wages usually increase faster than inflation (roughly 2 percentage points per year difference), so planning in real terms over a long period will result in lifetstyle falling behind general living standards. It can be helpful to consider what income relative to minimum wage will be, both currently and at retirement.

Normal age for me would be 68. Retirement date would be 2050 if I worked right till then. I will be 60 in 2042.  If rules stay the same () I could technically early retire at 58

If rules stay the same, your minimum pension age would be 57 - there is no legislated increase to 58. But prudent to assume 58 anyhow.

I would get advice closer to the time about taking lump sum vs not, depending on how health is, how my LISA and SIPP perform etc would likely answer that one. 

12:1 is a terrible lump sum commutation rate, especially at younger ages, so best to plan around taking income. It is very difficult to predict life expectancy unless death is going to take place within the next year, so health is hard to judge as many in ill health live for a long time.

it seems to me that we could retire as soon as we could access our pensions? Unless Im missing something, we need to start with a S&S isa and possibly bring that retirement date forward?

Sounds sensible - you could still use S&S isa to either purchase NHS Added Pension if you needed more income, or put it into the SIPP if not needing it until after age 57/58.

Suffolk_lass

You could also check out stopping work and living on your savings for a year or few before taking that pension. The indexation of pension would happen starting from when you stop contributing and the actuarial reduction would reduce over time.

Other things to consider are whether you partially retire (taking part pension) while continuing to work part time to boost things a bit. Many I know basically took their (max 25% TF) lump sum early and paid off debts, the additional cash from no longer paying mortgage enabling them to save (SIPP) to roughly the same position by the time they stopped work, and they got to reduce their hours while getting their part pension

Scrimps

Thank you both for your thoughts.  We think we would carry on working at lower hours later to avoid taking the pension reduction.  Because the world in 18-20 years is such an unknown place its impossible for us to say, so I guess just keep saving money and keep expenses low for maximum flexibility- neither of us want to be caught in those jobs weve had before that we've loathed but couldnt escape as being trapped by debt repayments etc.

That said we've had a very spendy few days buying tickets for shows to take our pre-school children too throughout the year ahead.  Its not frugal in any respect, but its money we're happy to spend.  Last time we planned a year of festivals and days out and theatre shows for us to do as a family....a massive pandemic showed up and everything got cancelled so we're keeping our fingers crossed!

We've also had some quotes back for extending the kitchen/downstairs bathroom extension.  We could really do with the extra space and a downstairs toilet but at £50k+ initial quote we're thinking we would rather have the money for life fun and financial security/flexibility. Sometimes we wish we were a bit more blissfully ignorant of pensions and mortgage overpaying consequences etc and could just get the extra borrowing, get the kitchen and not think beyond - "if i can make the debt repayment, I can afford it."