Nhs pension/ career break

Laura_141

Hi, I was wondering for some advice about my nhs pension.
 I have been working as a nurse for 8 yrs and am about to take a 6 month career break. I am debating whether or not to pay into it while about away as it will stretch my finances quite a bit. The amount will be £1500
 I have rang the pensions department for advice but they were pretty rushed and were concentrating more on telling me how to op out or in as opposed to the pros and cons. I haven’t got the best knowledge when it comes to pensions and am trying to learn so please be kind. 

Andy_L

Financial advice requires specific regulatory approval to provide, so your department cannot provide "the pros and cons" as that would be advice.

Your employer will be paying in ~3-4x your £1500 for the first 6 months. If you leave the scheme you throw away that "free money". In addition, if you leave for 6 months then your existing 2015 scheme pension will increase at the deferred-member rate of CPI rather than the active-member rate of CPI+1.5% for that time

https://faq.nhsbsa.nhs.uk/knowledgebase/article/KA-04473/en-us

Dazed_and_C0nfused

Assuming that the op is in the standard NHS CARE scheme I really don't think the employer contributions are of much relevance given there is no pension pot/fund being built up.

Financially it is almost certainly the sensible thing to remain in the scheme as that £1,500 may only be £1,200 after taking account the reduced tax that would be payable and it would accrue additional pension of around £300.

Which would be inflation proofed and could easily be payable from the schemes pension age for 30+ years.

NB.  Assuming op earns ~£32k based on the £1,500 figure.

MX5huggy

So £1500 for 6 months contributions is £3000 per year in contributions as the employee contribution rate is 9.3% your annual salary is £32000 ish per year? 

Your pension grows by 1/52 of your annual salary each year. 1/52th of  £32000 is £615 half for 6 months is £308 of pension. 

So pay your £1500 to cover your break and your annual pension will be an additional £308 per year for life from Retirement age. This is index linked + 1.5% so will be worth significantly more come retirement. 

Basically pay it getting an extra £308 of guaranteed pension by any other means will cost far more.

Dazed_and_C0nfused

MX5huggy said:

So £1500 for 6 months contributions is £3000 per year in contributions as the employee contribution rate is 9.3% your annual salary is £32000 ish per year? 

Your pension grows by 1/52 of your annual salary each year. 1/52th of  £32000 is £615 half for 6 months is £308 of pension. 

So pay your £1500 to cover your break and your annual pension will be an additional £308 per year for life from Retirement age. This is index linked + 1.5% so will be worth significantly more come retirement. 

Basically pay it getting an extra £308 of guaranteed pension by any other means will cost far more.

Sadly for the NHS staff it's only 1/54th 😢

Andy_L

Dazed_and_C0nfused said:

Assuming that the op is in the standard NHS CARE scheme I really don't think the employer contributions are of much relevance given there is no pension pot/fund being built up.

Financially it is almost certainly the sensible thing to remain in the scheme as that £1,500 may only be £1,200 after taking account the reduced tax that would be payable and it would accrue additional pension of around £300.

Which would be inflation proofed and could easily be payable from the schemes pension age for 30+ years.

NB.  Assuming op earns ~£32k based on the £1,500 figure.

Its relevant to the OP in that it is an estimate of the value of the pension i.e. they will get far more by staying in the NHS pension rather than just paying their £1500 into a private pension. Plus the employer does lose that money from their budget as it is used to PAYG the pensions of current retirees 

MX5huggy

Dazed_and_C0nfused said:

MX5huggy said:

So £1500 for 6 months contributions is £3000 per year in contributions as the employee contribution rate is 9.3% your annual salary is £32000 ish per year? 

Your pension grows by 1/52 of your annual salary each year. 1/52th of  £32000 is £615 half for 6 months is £308 of pension. 

So pay your £1500 to cover your break and your annual pension will be an additional £308 per year for life from Retirement age. This is index linked + 1.5% so will be worth significantly more come retirement. 

Basically pay it getting an extra £308 of guaranteed pension by any other means will cost far more.

Sadly for the NHS staff it's only 1/54th 😢

Should have checked, knew it was different from 1/49th of mine but then they get 1.5% over CPI each year. 

OP this makes little difference to your decision.

Albermarle

Basically pay it getting an extra £308 of guaranteed pension by any other means will cost far more.

OP - For your info, to buy a guaranteed pension of £308 pa at age 65 with full inflation linking would cost today about £10,000. So by only paying £1,500, it is a bargain.

Laura_141

Thank you everyone for you advice I really appreciate it. I will continue to pay into my pension while on my break