NHS AVC

dunstonh

The NHS still claim "We have negotiated special NHS terms for these arrangements. We review these regularly and there are no commission charges".

Commission was banned at the end of 2012.     That gives you an indication of how out-of-date it is.

In the case of Standard Life, they say "Standard Life will rebate 0.40% of the fund management charge by adding extra units to your fund each month". So, no commission charges and a 0.4% rebate on the FMC 

Standard Life doesn't really have a comparable retail product o the AVC any more as the retail version became obsolete.   The retail market has moved to platform-based tax wrappers (which are mostly SIPPs).  The AVC is still based on early 2000s generation products (the old PPP from that era).     The non-commission based versions available around 2005 through advisers were the same cost.   So, I suspect that effectively it is the old non-commission rates being offered and being badged as a discount even though in reality, the retail market now has better products/options at a lower cost.

Its the same with many AVCs to be fair.   When the government removed the requirement to offer an AVC in 2006,  a lot of the AVCs effectively became frozen in place in terms of the product and charges for those that continued to offer them.   So, what was great in 2006 looks pretty average in 2021.

battyboimatt

Thanks for the opinions guys, certainly lots to think about and look at, I just want to ensure that when I do get to retire I'm not going to be struggling. Looking at the additional Pension Calculator, so according to their calculator, I could buy an extra £2500 additional pension for monthly instalments of £159 for a maximum of 20 years. which would cost me £38,160 over 20 years. 

Am I missing something, but that seems a lot to just increase my pension by a total of £2500 

ewaste

battyboimatt said:

Am I missing something, but that seems a lot to just increase my pension by a total of £2500 

That's for guaranteed inflation linked income and £2500 in today's money, try finding that as an annuity especially at the moment.

What makes it seem expensive to a lot of people is that you are paying the Employee AND Employer side of providing the benefit. It should hopefully help reinforce just how valuable the scheme is.

claire111

battyboimatt said:

Thanks for the opinions guys, certainly lots to think about and look at, I just want to ensure that when I do get to retire I'm not going to be struggling. Looking at the additional Pension Calculator, so according to their calculator, I could buy an extra £2500 additional pension for monthly instalments of £159 for a maximum of 20 years. which would cost me £38,160 over 20 years. 

Am I missing something, but that seems a lot to just increase my pension by a total of £2500 

Have you taken into account tax relief on the contributions ? If you haven't and pay basic rate tax then at a very rough guess break even point will be once the pension has paid out for 12 years ..... everything received after 12 years will then be 'free' money   

Lowtrawler

battyboimatt said:

Thanks for the opinions guys, certainly lots to think about and look at, I just want to ensure that when I do get to retire I'm not going to be struggling. Looking at the additional Pension Calculator, so according to their calculator, I could buy an extra £2500 additional pension for monthly instalments of £159 for a maximum of 20 years. which would cost me £38,160 over 20 years. 

Am I missing something, but that seems a lot to just increase my pension by a total of £2500 

Compare to what it would cost to buy a £2,500 annuity. review the table linked below:

https://www.hl.co.uk/retirement/annuities/best-buy-rates

Based on that table, £100,000 would buy a Single life, RPI, 5 year guarantee annuity of £3,680 at age 70. On a pro-rata basis, your £38,160 would only buy you an index-linked pension of £1,404. Consequently being able to get a £2,500 index linked pension is a real bargain. People often under-estimate the cost of providing a pension. Even on a level basis (no annual increases - the payments stay the same every year throughout your retirement, the table shows that it costs £17.27 for every £1 of pension at age 70 (based on your £38,160 a level pension of £2,210 per year). The index linked pension costs £27.17 for every £1 of pension.

As Claire111 says, don't forget that you get tax relief on the contributions you make and so the £159 per month is only £128 if you are a basic rate taxpayer or £96 if you are a higher rate taxpayer.

Dazed_and_C0nfused

MFW2026 said:

Does anyone have any tips that can help me in regards to NHS additional payments what this would look like at retirement age as i understand doesn't go into a 'pot' as such. I am trying to plan so i know i have enough at retirement however NHS pensions do not give me an estimate for additional payments only regular nhs pension payments which still dont make sense to me if im honest!

Are you wanting to purchase additional guaranteed NHS pension or build up a separate pot of money?