SSI, LISA, SIPP or increase NHS Pension Contributions?

Adamc

Hi 

I'm looking to invest around £500 per month to save for retirement. I'm a 34 year old junior grade NHS employee earning £43K and paying 9.1% in NHS Pension contributions. I do a little overtime on bank so on average earn an extra £300 per month. I have student debt of £16K.

Where are people in my position advised to put their money? I'm finding the pension implications a little difficult to fully comprehend. Although I love my job I hate the conditions and environment I work in. I'd love to have the option to drop days later on or retire early. 

So many of my colleagues have joined the private sector so that's also an option but at the moment I'm staying in the NHS. 

Dazed_and_C0nfused

Going for one of the NHS options linked to your existing 2015 CARE pension may well give the most secure guaranteed pension.

But it is generally less flexible than building up a pension fund with contributions to a DC fund which can be taken from age 57 (for you).

If you will probably leave the NHS at some point maybe take the opportunity to build up as much as you can in DB pension whilst the opportunity is there or maybe look at ERRBO if you will be in the NHS scheme long term.

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

NB.  I'm assuming you understand how valuable your NHS pension is and the difference between DB and DC schemes.

DoublePolaroid

Despite the grumbles of many of my colleagues, whose main complaint boils down to the 2015 pension being slightly less amazing than what went before, the NHS pension is fantastic value. 

It’s worth being aware, especially as you mention early retirement, that one of aforementioned grumbles is the normal pension age in the 2015 scheme being tied to your state pension age. If you want to retire early the annual pension is actuarily reduced due to drawing it for longer, illustrated here. 

Personally, I’m accumulating a separate fund in an S&S ISA to help bridge the gap between when I retire and the time I actually draw the pension, because the longer you can defer, the less the reduction in benefits. A SIPP would do the same job and be more tax efficient for most people though.

Adamc

DoublePolaroid said:

Despite the grumbles of many of my colleagues, whose main complaint boils down to the 2015 pension being slightly less amazing than what went before, the NHS pension is fantastic value. 

It’s worth being aware, especially as you mention early retirement, that one of aforementioned grumbles is the normal pension age in the 2015 scheme being tied to your state pension age. If you want to retire early the annual pension is actuarily reduced due to drawing it for longer, illustrated here. 

Personally, I’m accumulating a separate fund in an S&S ISA to help bridge the gap between when I retire and the time I actually draw the pension, because the longer you can defer, the less the reduction in benefits. A SIPP would do the same job and be more tax efficient for most people though.

S&S ISA or Lifetime S&S ISA?

DoublePolaroid

Boggo S&S, not LISA, I’m not eligible for the latter. To be clear, I’m in the very fortunate position to be contributing to the 2015 scheme right up to the annual allowance limit. If I wasn’t then I’d be utilising a SIPP first for my objectives, up to the annual allowance and only putting any surplus beyond that into an ISA. 

Adamc

DoublePolaroid said:

Boggo S&S, not LISA, I’m not eligible for the latter. To be clear, I’m in the very fortunate position to be contributing to the 2015 scheme right up to the annual allowance limit. If I wasn’t then I’d be utilising a SIPP first for my objectives, up to the annual allowance and only putting any surplus beyond that into an ISA. 

Was it easy to understand the different ways to increase contributions?

Would you get a LISA if eligible?

Albermarle

Adamc said:

DoublePolaroid said:

Boggo S&S, not LISA, I’m not eligible for the latter. To be clear, I’m in the very fortunate position to be contributing to the 2015 scheme right up to the annual allowance limit. If I wasn’t then I’d be utilising a SIPP first for my objectives, up to the annual allowance and only putting any surplus beyond that into an ISA. 

Was it easy to understand the different ways to increase contributions?

Would you get a LISA if eligible?

Alternatives for you  to adding to NHS pensions are

1) Saving the money as cash in a savings account. You should have an emergency savings fund for unexpected large expenses/job loss ( unlikely for you I guess )
2) Investing in a S&S ISA - no bonuses/tax breaks but money is accessible if necessary, although the plan should be to leave it alone for many years to hopefully grow.
3) Having a LISA - 25% added bonus - not available until age 60 when it can be taken tax free. Limit to add of £4K pa Also can be used to assist purchase of a first time house purchase. Is available as a Cash LISA or S&S LIsa.
4) Add to a DC pension/SIPP. Contributions attract tax relief with 25% added on. Available from late 50's but may have to pay up to 15% tax on withdrawal.

Stocks & shares ISAs: find the best platform - MSE (moneysavingexpert.com)
Lifetime ISA (LISA): how they work & best buys - Money Saving Expert
Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)

Descrabled

NHS Pension

The NHS pension is fantastic value. I have a small NHS pension and two company pensions  The inflation addition to the NHS payment each year after retirement can't be beaton. You also have tax relief on your contributions.

I paid 15% of my gross income into my pension schemes for the last 30 years of my working life.  The best financial decision that I ever made!

Adamc

Descrabled said:

NHS Pension

The NHS pension is fantastic value. I have a small NHS pension and two company pensions  The inflation addition to the NHS payment each year after retirement can't be beaton. You also have tax relief on your contributions.

I paid 15% of my gross income into my pension schemes for the last 30 years of my working life.  The best financial decision that I ever made!

How did you go about researching the best arrangement for your needs? Did you take expert advice or DIY? What happens to your pensions (and additional contributions) should the worst occur? 

DoublePolaroid

Adamc said:

DoublePolaroid said:

Boggo S&S, not LISA, I’m not eligible for the latter. To be clear, I’m in the very fortunate position to be contributing to the 2015 scheme right up to the annual allowance limit. If I wasn’t then I’d be utilising a SIPP first for my objectives, up to the annual allowance and only putting any surplus beyond that into an ISA. 

Was it easy to understand the different ways to increase contributions?

Would you get a LISA if eligible?

I haven’t had to make additional contributions so I would refer you back to D&C’s useful link posted above. 

Similarly I think Albermarle has covered the basics of ISA and LISA. FWIW no I wouldn’t use a LISA as I want to keep the option of retiring before aged 60 open and I don’t need a house. Hypothetically if I was 100% certain I wouldn’t need the money until after 60 then maxing the S&S version would be a no-brainer, assuming pension maxed out. 

Reg_Smeeton

Adamc said:

Hi 

I'm looking to invest around £500 per month to save for retirement. I'm a 34 year old junior grade NHS employee earning £43K and paying 9.1% in NHS Pension contributions. I do a little overtime on bank so on average earn an extra £300 per month. I have student debt of £16K.

Where are people in my position advised to put their money? I'm finding the pension implications a little difficult to fully comprehend. Although I love my job I hate the conditions and environment I work in. I'd love to have the option to drop days later on or retire early. 

So many of my colleagues have joined the private sector so that's also an option but at the moment I'm staying in the NHS. 

I’m in a similar position to you, age and circumstances, just in local government instead.

My personal hierarchy of savings (in order of priority):

Additional contributions into the Local Gov Pension Scheme (paid at source)
Emergency cash savings held in a range of regular savers and easy access accounts

Once my cash savings exceed a certain level these are then distributed into:
SIPP and LISA (to bridge gap between 58/60 - state pension age)
S&S ISA (for retirement pre 58/60?)

All things equal, if I remain in my local government post until the age of 40, I will have accrued enough in the LGPS to cover my essential outgoings, when I start to claim it alongside state pension at 68 (or whatever age that will be by the time I get there). I’m hoping this will take a lot of pressure off my work life and I can either begin the transition down to 3/4 days a week or move to a lower grade position. My current role can be both very physically and mentally demanding and not sure that doing it full time well into my 50s and 60s is realistic!