NHS Additional Pension Payments or something else

Lowtrawler

Richteasandwich said:

Thanks for the comments. I think I’m looking at it the wrong way as wasn’t really thinking about inflation proofing and guarantee of income. It’s just on paper it doesn’t sound great and my MIL dismissed it straight away (assuming I’ve done the calc right too!). 

One way to look at it is how much it would cost you to buy an index-linked annuity of £250. In the current market, it will cost you at least £35 per £1 of pension. Hence, you would need to pay over £8,500 for an equivalent pension outside the NHS Scheme. It makes the £4716 look like a bargain.

Most "experts" would recommend drawing down no more than 4% of any money purchase fund - less than £190 of your £4716, to obtain a sustainable income through retirement. Even at 4%, you run the risk of falling markets.

Richteasandwich

@MFW2026 I wondered about an NHS AVC and have done a little bit of reading on them so will look into this further. 

Richteasandwich

@Lowtrawler I’m in a DC pension at work so the annuity viewpoint is a good way for me to look at this as that’s the potential route I might have to take. I know the rates are terrible and there are other options, but my annual pension statement quotes annuity rates which are pretty depressing but it at least puts this into context for me. 

Lowtrawler

Richteasandwich said:

@Lowtrawler I’m in a DC pension at work so the annuity viewpoint is a good way for me to look at this as that’s the potential route I might have to take. I know the rates are terrible and there are other options, but my annual pension statement quotes annuity rates which are pretty depressing but it at least puts this into context for me. 

TBH, index-linked annuities have been around 35x - 45x for at least a couple of decades. I suspect it has made them a very unpopular product. It just shows how valuable the government final salary schemes actually are. Even with a real rate of return of 2% pa in a DC scheme, over 40 years 25% of gross salary would need to be paid into the DC pot to create a 2/3 salary pension without any guarantees against inflation and without scaling as salary increases.

I reckon a DC scheme would need to get at least 40% of gross salary paid into it each year to provide equivalent benefits to the NHS scheme.

Richteasandwich

That’s an incredible amount! I think I made the wrong career choice. Thanks for the explanation, interesting to see a comparison.