Additional savings to NHS pension or Stakeholder pension

adamcarvell

hugheskevi said:

adamcarvell said:

well ive got my nhs pension and two DC pots and a lump sum im thinking of opening a sipp putting them all in that or if the nhs stakeholder pension is better i may do that but cant find much information about it. im in the 2015 pension only.

A Stakeholder pension and a SIPP are at opposite ends of the pension spectrum, with a Stakeholder pension being intended for inexperienced investors (and nowadays not really used except for niche situations) whilst a SIPP is for those who want to manage all their investments themselves. It is surprising you are choosing between the two, and not including personal pensions, for example.

I'm very suspicious of employers who have not updated their DC provisions in many years and still offer Stakeholder pensions. For example, the NHS Stakeholder charges 1% and offers a discount, which was said to be 0.4% earlier in the thread. Whereas the more modern Civil Service AVC Mastertrust has a charge of 0.3% - so the cost is half the amount of the NHS Stakeholder, even after the discount, and is a much more modern pension arrangement.

I’m no expert, others will be able to advise you better than I can. I think with the stakeholder it comes directly from your pay which might provide some benefit?

I think the contributions are via net pay. This doesn't have any benefit over relief-at-source contributions, it is just a different way of reaching the same end outcome.

I only have the option of salary sacrifice for the stakeholder. I think may be direct debit for lump sums. My original payment is direct debit but I think they changed it. Salary sacrifice I think is better.

I don't think it is salary sacrifice, but net pay arrangement, which is a different thing to salary sacrifice.

i wouldn't say i was choosing between the two just exploring options atm.
on my own thread vanguard life stratergy was mentioned as a favourable option i just wondered if the nhs had comparable options im still not sure and won't be making any rash decions but i am very gratefull  for everyones input and suggestions as a pension newbie.

Moonwolf

hugheskevi 

Mathematically, ERRBO and Added Pension are almost the same thing, as they are based on the same actuarial assumptions. A member who pays ERRBO contributions to reduce the age from which an unreduced pension can be drawn would end up in almost the same position as a member who contributed the same amount to Added Pension to increase their pension, then drew the pension (with reduction) at the same age as the ERRBO member. There are some differences are survivor and ill-health benefits, so the position is not identical. 

I came to this conclusion initially but then I thought the additional pension doesn’t attract the extra 1.5% on top of CPI so the benefit diverges over time? I may well have misunderstood this. It doesn’t really matter  to me now as I have the ERRBO and I expect to take my 2015 pension at 65.

Also I wanted monthly payments and didn’t/don’t know if I will stay. With ERRBO I know what I will get if I leave, pension accrued to date at 65 instead of 70. With additional pension I couldn’t work out the impact of leaving early - “the proportion of the additional pension you have earned to date.”

hugheskevi

Moonwolf said:

hugheskevi 

Mathematically, ERRBO and Added Pension are almost the same thing, as they are based on the same actuarial assumptions. A member who pays ERRBO contributions to reduce the age from which an unreduced pension can be drawn would end up in almost the same position as a member who contributed the same amount to Added Pension to increase their pension, then drew the pension (with reduction) at the same age as the ERRBO member. There are some differences are survivor and ill-health benefits, so the position is not identical. 

I came to this conclusion initially but then I thought the additional pension doesn’t attract the extra 1.5% on top of CPI so the benefit diverges over time? I may well have misunderstood this. It doesn’t really matter  to me now as I have the ERRBO and I expect to take my 2015 pension at 65.

Also I wanted monthly payments and didn’t/don’t know if I will stay. With ERRBO I know what I will get if I leave, pension accrued to date at 65 instead of 70. With additional pension I couldn’t work out the impact of leaving early - “the proportion of the additional pension you have earned to date.”

On average it should all be the same (the actuarial calculations take into account the expected remaining time purchasers will benefit from enhanced in-service revaluation), but of course no one person is average, so things like how long you expect to remain in employment, whether you have dependents and so benefit from survivor payments, whether you think you might benefit from ill-health in the future and so on all influence whether Added Pension or ERRBO might be most appropriate for individual circumstances. But in most cases the difference between the two will be much less than most think.

Nurse2047

I currently buy additional pension which comes out of my salary monthly. 

I also pay a small amount into https://www.pru.co.uk/rz/nhs/ which comes out my salary.
I also have a sipp I pay into the Target retirement fund 2040 with Vanguard. This is to help bridge the gap until I can have my 2015 pension along with the AVC. 

Others may disagree with my choice however suits me currently and my goals. 

Lowtrawler

Moonwolf said:

hugheskevi 

Mathematically, ERRBO and Added Pension are almost the same thing, as they are based on the same actuarial assumptions. A member who pays ERRBO contributions to reduce the age from which an unreduced pension can be drawn would end up in almost the same position as a member who contributed the same amount to Added Pension to increase their pension, then drew the pension (with reduction) at the same age as the ERRBO member. There are some differences are survivor and ill-health benefits, so the position is not identical. 

I came to this conclusion initially but then I thought the additional pension doesn’t attract the extra 1.5% on top of CPI so the benefit diverges over time? I may well have misunderstood this. It doesn’t really matter  to me now as I have the ERRBO and I expect to take my 2015 pension at 65.

Also I wanted monthly payments and didn’t/don’t know if I will stay. With ERRBO I know what I will get if I leave, pension accrued to date at 65 instead of 70. With additional pension I couldn’t work out the impact of leaving early - “the proportion of the additional pension you have earned to date.”

The additional pension attracts the same annual increases as the main pension (the monthly payments to buy the additional pension increase each year).

Lowtrawler

hugheskevi said:

AgathaSquirrel said:

https://pensions.gov.scot/nhs/your-membership/your-contributions/increasing-your-pension

This is where I took my information from but on rereading, I’m wondering if I’m an active member of the 1995 pension and if not, surely with the McLeod judgement I should be able to purchase extra until 2022?

Technically you are an active member of the 1995, but that was the case before McCloud judgment - due to the retention of the final salary link, you are active in both the 1995 and 2015 schemes.

Your 2015-22 service will not be put back into the 1995 scheme until a later date, probably 2023 or 2024. However, any 2015 scheme Added Pension or ERRBO you purchase before April 2022 will be converted into 1995 scheme Added Pension.

Unless I am mistaken about how ERRBO works (which is quite possible) it is a lot less useful for members who are likely to be having the significant part of their pension coming from the legacy (1995 or 2008) parts of the scheme (particularly given the McCloud ruling where many are better off remaining in that scheme until March 2022). ERRBO reduces the penalty for retiring before NRA on 2015 benefits only but is paid for through a  whole salary percentage increase in contribution. 

ERRBO only affect future accruals, so it doesn't matter whether a member has past service in other schemes or not.

Mathematically, ERRBO and Added Pension are almost the same thing, as they are based on the same actuarial assumptions. A member who pays ERRBO contributions to reduce the age from which an unreduced pension can be drawn would end up in almost the same position as a member who contributed the same amount to Added Pension to increase their pension, then drew the pension (with reduction) at the same age as the ERRBO member. There are some differences are survivor and ill-health benefits, so the position is not identical.

One potentially very useful difference however is that ERRBO does not generate a pension input whereas Added Pension does - which could be useful for those facing Annual Allowance issues.

Am I correct in thinking that the Additional Pension is better than ERRBO for survivor and ill-health benefits?

My wife currently buys Additional Pension and I am considering whether she should go for more additional pension or ERRBO. From the sound of things, there will be little to choose between the 2 and more additional pension will be just as beneficial even if she is planning to retire a couple of years early?

hugheskevi

Lowtrawler said:

Am I correct in thinking that the Additional Pension is better than ERRBO for survivor and ill-health benefits?

My wife currently buys Additional Pension and I am considering whether she should go for more additional pension or ERRBO. From the sound of things, there will be little to choose between the 2 and more additional pension will be just as beneficial even if she is planning to retire a couple of years early?

Yes, Added Pension would be more beneficial in those scenarios (although only for death-in-service, not death-after-retirement).