Best ways to retire before 68 in the NHS pension

Kristoff77

Hi, I've been working in the NHS for almost 2 years now. I transferred my pension from my previous job into the 2015 scheme. 

Looking at the NHS pension scheme it looks a very good one but only if you wait to take your pension at 68. I'm 39 at the moment. I don't invisage working till 68 as that seems very old to retire and I know many don't make it much past that age and if they do they are too old to fully enjoy retirement.

So my two ideas were either to save up money in a LISA and savings account to bridge the gap and resign at 65 then take my pension at 68.

Or go part time in my early 60s till I'm 68. I was thinking maybe the part time option could be better as I understand the revaluing of the NHS pension stops when you resign? I presume if I was still employed by the NHS even as part time all my previous years would still benefit from the revaluation? I think it just goes up with inflation when you resign?

I looked at ERRBO which means paying more now to retire at 65 but it looks like i had to apply from 3 months of joining to include my transfer in pension so I'm not sure it's worth it.

Dazed_and_C0nfused

LISA is a valid option but savings account is a poor one.

You could opt for a personal pension or SIPP, they have the benefit of tax relief on the way in and in the scenario you describe a lot can be taken without paying any tax.

For example if you built up a fund of £50,280, which ignoring investment return/loss, would consist of £40,224 from you and £10,056 in tax relief you could take the whole lot over 3* years without paying any tax.

If you took 25% TFLS as part of each payment then in each tax year you would get £16,760.  £4,190 TFLS and £12,570 taxable income covered by your Personal Allowance.

Rich1976

Most people will have no option but to continue working until they can claim their state pension so 68 may not seem so old after all. Also many of that age and older are still fit, healthy and active and not sat in front of day time TV like our grandparents were.
to bridge the gap you would need to save extra into your own pension or investment isa each month on top of your employment pension but don’t forget to live for today also and ensure you are saving for short and medium term goals as you still have a long way to go before retirement.

Nebulous2

We've no idea what the regulatory landscape will be like in almost 30 years. Any planning you do now could be scuppered by changes before then. 

As it stands NHS pension can be drawn earlier than state pension age, with an actuarial reduction, so that could be a possibility rather than fully funding the gap. The important thing is to have the wherewithal to pay your way and meet any unexpected expenditure. 

I took a public sector pension at 59, which covers most of our needs, and am working part-time in the NHS. We moved to a different part of the country, with cheaper property and that freed up some capital which is there if needed until state pension kicks in. I'm accruing a bit of NHS pension, and putting most of my part-time earnings into a SIPP, so we are actually adding to our assets rather than depleting them.

The decision to take the pension was psychological as much as financial.  After a lifetime of a monthly wage and having more capital than ever, I didn't like the idea of not having a regular income and watching our money drift away. That payment into my bank account every month is very reassuring.....

DoublePolaroid

I’m in similar position at a similar age albeit having accrued 15 years in the 1995/2015 schemes. My plan is to go at 60 at the latest with savings in an S&S ISA to bridge the gap between retirement and drawing the pension (to reduce the amount of actuarial reduction, if necessary) though if I was able I’d put some savings into a SIPP instead. 

As an active member the 2015 pension is revalued by CPI + 1.5% whereas in deferment it is CPI with no cap and a floor of 0%. This is not to be sniffed at as it’s better than just about anything else out there and for me it’s good enough that I wouldn’t feel the need to remain working part time solely to avoid deferment. 

MX5huggy

I think the premise of “not taking before 68” is poor. The reductions for early retirement are non penalising just cover the fact you will be paid for longer. 

Both of us currently plan to take our NHS pension and LGPS (very similar) as soon as we can afford to. We won’t take any optional lump sums (poor value).  It’s saving as much as we can in SIPP to bridge from 60 (ish) to State Pension age that is key. 

Albermarle

 I don't invisage working till 68 as that seems very old to retire and I know many don't make it much past that age and if they do they are too old to fully enjoy retirement.

I can fully understand you not liking the prospect of working until you are 68, however the prospects of living a long time beyond 68 are a lot higher than you seem to think. Statistically a 68 year old will live on average maybe another 20 years , so 50% will live longer than that. Of course if you retire at 60 you have a better chance of living more years of healthy retirement that you can enjoy.

As said above you have two options-

Take the NHS pension early - a reduced annual pension but for more years, so a zero sum calculation.

Build up a pot of money, probably best via a pension or maybe a Lisa, or both.

Or do both and do not forget the state pension, which is an important part of retirement planning.

ewaste

 The obvious answer is to take the pension before scheme age if the actuarially reduced amount suits your needs. This can be supplemented with a lump-sum from AVCs or withdrawals from a separate DC scheme. Therefore a mix of secure income to cover basic needs and DC withdrawals as supplemental income. 

You can work part time to retain the +1.5% revaluation while supplementing your income from a DC scheme. Alternatively you retire fully defer and live off withdrawals from a DC scheme until normal DB scheme age.

I think you've really got to view the NHS and other surviving DB schemes as essentially the risk mitigation element of your overall retirement provision. They secure your later years when you likely won't be able to work and can't afford to take much if any risk. You might not be mentally capable or willing to 'manage' a Drawdown scheme at an advanced age.

The state pension, and/or annuitisation, normally fulfills this role for many but isn't sufficient in itself. However once deferred a DB scheme can usually be put into payment whenever you choose depending upon your circumstances. 

It's very much my 'plan' to try and retire early then defer while drawing down on a DC pot. I'll likely still put it into payment before getting my state pension at 68+ depending upon circumstances. 

Nurse2047

I resonate with this so much, the thought of doing this job another 25 years fills me with dread! 

Workerdrone

DoublePolaroid said:

I’m in similar position at a similar age albeit having accrued 15 years in the 1995/2015 schemes. My plan is to go at 60 at the latest with savings in an S&S ISA to bridge the gap between retirement and drawing the pension (to reduce the amount of actuarial reduction, if necessary) though if I was able I’d put some savings into a SIPP instead. 

As an active member the 2015 pension is revalued by CPI + 1.5% whereas in deferment it is CPI with no cap and a floor of 0%. This is not to be sniffed at as it’s better than just about anything else out there and for me it’s good enough that I wouldn’t feel the need to remain working part time solely to avoid deferment. 

My wife's in a similar position 27 years in the NHS so 1995 and 2015 schemes. Unless I am wrong (And I'm sure someone will be along shortly to correct me) The past 6 years will be subject to the McCloud judgement so you will be offered a choice of whether to take them as part of the 1995 scheme or the 2015 scheme. Im sure if you took them as 1995 they are accessible at an NRA of 60.

Aside from them building up a private SIPP to bridge the gap to 68 and possibly taking a less demanding part time job at 60 helps fill the gap.

Kristoff77

Thankyou for the replies. I hadn't even thought about a private pension and I'll have to read up about this a bit, I presume it won't negatively impact my state or NHS pension? Mu salary isn't high. I was thinking a LISA or S&S isa could be the way to go but unfortunately I've missed out on the S&S LISA (I opened a cash one at 39). Also a personal pension would mean someone could invest for me as I have no knowledge of investments.