Are the figures correct?

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

DB = defined benefit.  NHS is a DB scheme and it guarantees an inflation proofed pension from the schemes normal pension age, usually linked to your State Pension age.

For example on £80k you would contribute £10,800.  Which in real terms is likely to be just £6,480 reduction in net pay after taking account of tax relief.

In return you accrue a pension of £1,481.48.


DC = defined contribution.  This is where you contribute and (usually) invest in stocks or funds and build up a pension pot from which you can buy an annuity (not popular at the moment) or drawdown money as you want.  There are different options for taking money out and this tends to have more flexibility but you are subject to how well your investment choices have done.

Thanks that is great to know. How does tax relief work on pensions? Does it apply to public and private sector pensions?

Yes.

Most DB public sector schemes use the net pay method.  For example you have a salary of £80k but pay £10,800 in pension contributions so your taxable pay is only £69,200.  So you avoid paying tax on the £10,800 and immediately receive the maximum possible tax relief 

A lot of private sector schemes use "relief at source" so if you contribute £10,800 you get 25% added by the pension company, courtesy of HMRC, giving you a pension fund of £13,500.  If you are a higher rate payer you could be due extra tax relief on the gross contribution of £13,500.  If you pay enough higher rate tax you could save £2,700 in personal income tax

Grumpy_chap

A bit of a tangent, but out of interest, has the OP asked their friend with the NHS job what the in/out London Weighting would be?  Or is it zero?