NHS pension and the increased AA

homestraight

Hi All

Another pensions query from me. 
My sis is a NHS GP and has just started to breach the £40k AA in the last few years and used up her carry forward. Was likely to keep breaching AA each year by a modest amount. Still a fair way off the LTA but that's going now anyway.

We were chatting and throwing round some amateur thoughts. 
She's unlikely to get anywhere near the new £60k AA at her current and predicted income. 
If she has spare disposable income should she be considering a SIPP or NHS AVC?
(She maximises her ISAs.)

Any thoughts on the pros and cons in doing this? 
Any thoughts on SIPP vs AVC?
She likes the thought of this being IHT planning option for her kids and there being no LTA.... things could change. 
I think she may also be able to claim back some of her higher rate tax via her annual self assessment if using a SIPP. Not sure though. 

I think it can be quite delayed for her to get a pension statement each year which can make it difficult to know how much AA she has 'left' to play with but she could make a reasonably conservative estimate? 

She's likely to take some professional advice if she wants to go any further with it but I was interested in the forum members thoughts on this. 

Thanks in advance 
Hs

Sarahspangles

homestraight said:

I think it can be quite delayed for her to get a pension statement each year which can make it difficult to know how much AA she has 'left' to play with but she could make a reasonably conservative estimate? 

If you are referring to the NHS ‘Total Reward Statement’ this covers similar information to the P60 and annual pension statement many non-NHS employees receive, she’ll get a P60 as well during June at the latest, a few weeks before the TRS.

However she already has the information from which this is derived on payslips, in a less convenient format. Her March payslip(s) will have salary to date and tax paid so she should have a window of a few days in which she can do a quick calculation and top up a SIPP.   

If it’s a factor in the decision about how much to contribute, she could use the scheme rules to estimate how much she has added to her projected pension in the year since her last TRS.  

Flugelhorn

homestraight said:

Hi All




She likes the thought of this being IHT planning option for her kids and there being no LTA.... things could change. 

^This - I have a pot that was from AVCs - haven't touched it as exceeded LTA on DB pension, OK so now the LTA has gone but I only started the extra pension decades ago  because there were no such limits, if I had known that such  would be imposed then I would have put money elsewhere. As it is I will still probably leave it to the offspring but am always wary that the LTA could be reimposed 

GrubbyGirl_2

Just be aware that although LTA has gone for now, labour has said it will bring to back if they get into power.  In the NHS it's very easy to find yourself in trouble because the pension benefits are so good and the LTA is not actually based on what you pay in but what you get out.  The calculation is annual pension x 20 + lump sum.  I paid AVCs into the 1995 scheme for many years when we were allowed to in the 90's and 00's so I could get the max pension, however what I hadn't factored on was promotions and my salary increasing.  I would have been ok if the LTA hadn't been reduced but when I retired 3 years ago I ended up with a £40k tax bill so my pension was reduced by £2k per year to pay it.  I should point out I never exceeded the annual allowance.

As your sister is likely to be like me and work their whole career in the NHS and her salary will be similar to what I had at the end then she could fall foul of any LTA restrictions if there were any BUT having said that with the inflationary uplifts it has only taken me 3 years to get back to the pension amount I would have had if the tax had not been taken

homestraight

Sarahspangles said:

homestraight said:

I think it can be quite delayed for her to get a pension statement each year which can make it difficult to know how much AA she has 'left' to play with but she could make a reasonably conservative estimate? 

If you are referring to the NHS ‘Total Reward Statement’ this covers similar information to the P60 and annual pension statement many non-NHS employees receive, she’ll get a P60 as well during June at the latest, a few weeks before the TRS.

However she already has the information from which this is derived on payslips, in a less convenient format. Her March payslip(s) will have salary to date and tax paid so she should have a window of a few days in which she can do a quick calculation and top up a SIPP.   

If it’s a factor in the decision about how much to contribute, she could use the scheme rules to estimate how much she has added to her projected pension in the year since her last TRS.  

Thank you
She's in a partnership so doesn't her paid in the 'normal' way. 
Is it an option to just wait and see and use carry over allowance? 

homestraight

Flugelhorn said:

homestraight said:

Hi All




She likes the thought of this being IHT planning option for her kids and there being no LTA.... things could change. 

^This - I have a pot that was from AVCs - haven't touched it as exceeded LTA on DB pension, OK so now the LTA has gone but I only started the extra pension decades ago  because there were no such limits, if I had known that such  would be imposed then I would have put money elsewhere. As it is I will still probably leave it to the offspring but am always wary that the LTA could be reimposed 

GrubbyGirl_2 said:

Just be aware that although LTA has gone for now, labour has said it will bring to back if they get into power.  In the NHS it's very easy to find yourself in trouble because the pension benefits are so good and the LTA is not actually based on what you pay in but what you get out.  The calculation is annual pension x 20 + lump sum.  I paid AVCs into the 1995 scheme for many years when we were allowed to in the 90's and 00's so I could get the max pension, however what I hadn't factored on was promotions and my salary increasing.  I would have been ok if the LTA hadn't been reduced but when I retired 3 years ago I ended up with a £40k tax bill so my pension was reduced by £2k per year to pay it.  I should point out I never exceeded the annual allowance.

As your sister is likely to be like me and work their whole career in the NHS and her salary will be similar to what I had at the end then she could fall foul of any LTA restrictions if there were any BUT having said that with the inflationary uplifts it has only taken me 3 years to get back to the pension amount I would have had if the tax had not been taken

Thanks both

I agree it is a risk for her to consider. 
She is frugal and has inheritance money so has the funds. 
I suppose due her relatively modest cost of living she could cope with any future LTA taxation but it would likely be hefty. 
Plenty of good for thought for her. 


Thank you all for your thoughts. Much appreciated