NHS Pension..?

JustAnotherSaver

We'll get a direct answer in a few weeks I guess but in the meantime I'm wondering if anyone here has a bit of insight or is it one of those questions where the answer is "it depends..."?

Just wondering what the NHS pension is / how it works?

By that I mean currently the individual it applies to is getting the bare minimum: 3% employer contributions & they pay in the minimum 5%. It doesn't matter if they pay in anything beyond that 5%, the employer will only pay in 3% so anything above and beyond actually now goes in to their SIPP.

That's about to change & they'll soon be working for the NHS. Pensions weren't brought up in the interview process & they'll obviously find out when they come to start there but just wondered if anyone knew in the meantime.

Unless it's "well if you work as XYZ then you get X-% but if you do ABC then you get Y-%..."?

Thrugelmir

No shortage of information online

https://www.nhsbsa.nhs.uk/member-hub/joining-scheme

Dazed_and_C0nfused

Just wondering what the NHS pension is / how it works?

It's a defined benefit (career average) scheme.  So you build up a guaranteed, inflation proofed, pension.  The contribution amount isn't really of any relevance as you aren't building up a pension pot like you do with a defined contribution scheme.

For example say you earn £30,000 and pay 9.3%.  That's £2,790 pre tax relief and a real cost of £2,232 after tax relief.

In return you build up a pension of £555.  Which is revalued (inflation proofed) each year till you reach the schemes normal pension age or opt to take an actuarially reduced pension.  I think the inflation proofing is CPI + 1.5%.

Fuller explanation here,

https://www.which.co.uk/money/pensions-and-retirement/company-pensions/public-sector-pensions-explained/nhs-pension-schemes-explained-azydt0q5t434

JustAnotherSaver

So it's a completely different way of doing things then? 

I read what you put and I may as well have just put my head through a wall as that's what it feels like  
I'll have another bash at trying to grasp it tomorrow when I'm not about to go to bed. See if I get on any better. 

Thanks for the response though. I'll have a read of your link on my break tomorrow. 

On-the-coast

in short, it’s a very good pension, much better than the first one you described :-)

Dazed_and_C0nfused

Don't forget the contributions that are paid for one year could result in £555 (at today's prices) being paid for 30+ years in retirement 

Daliah

Dazed_and_C0nfused said:

Don't forget the contributions that are paid for one year could result in £555 (at today's prices) being paid for 30+ years in retirement 

So could be all of £16,650 a year?

Dazed_and_C0nfused

Daliah said:

Dazed_and_C0nfused said:

Don't forget the contributions that are paid for one year could result in £555 (at today's prices) being paid for 30+ years in retirement 

So could be all of £16,650 a year?

Could be more than that.

The current scheme that new members would join has an accrual rate of 1/54th of pensionable pay so if you started at 18, worked full time and stayed in the NHS until the schemes normal pension age you could accrue 50 years.

Using my example that would be a pension of £27,750.  However that doesn't take account of any pay increases or the annual revaluation each years pension accrued would receive.

JustAnotherSaver

So if you were involved with the NHS pension but also had your own SIPP (but didn't have nearly as much knowledge/confidence as you guys in what you're doing).... 

Would you keep paying in to the pair of them or would you cease SIPP contribs & put that money instead in to the NHS pension? In addition to what'd be going in to your NHS pension anyway. 

Dazed_and_C0nfused

JustAnotherSaver said:

So if you were involved with the NHS pension but also had your own SIPP (but didn't have nearly as much knowledge/confidence as you guys in what you're doing).... 

Would you keep paying in to the pair of them or would you cease SIPP contribs & put that money instead in to the NHS pension? In addition to what'd be going in to your NHS pension anyway. 

That really does depend on personal circumstances.

I think buying Additional pension with the NHS will add extra secure income form the schemes NPA.

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/additional-pension

And there is early buy out.

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/early-retirement-reduction-buy-out-errbo

But a SIPP/personal pension will add flexibility if you were maybe considering early retirement and needed something to bridge the gap between finishing work and the NHS NPA and didn't like early buy out.

NB.  You can take the NHS pension early without early buy out but only with an actuarial reduction.  Which a lot of people see as a penalty.  Though in reality it's just trying to balance out the fact that you have chosen to take it early and as such be paid for a longer period.

Nebulous2

The. NHS pension is a remarkably good deal. It gives a guaranteed pension, which is protected for life. There are often moans about it internally, often due to not understanding it, and not being happy about changes to it. 

The contribution rate rises as salaries rise, higher earners pay a bigger percentage. 

Your friend could transfer their SIPP into the scheme to get more pension, which needs to be done in the first year of membership. A quote would be available to show what it would buy.