NHS pension ?going private

Mamalaa

I have been working for the NHS and been paying into my pension for 19 years (in Scotland if that makes a difference). I have been looking at jobs in the private sector and am a bit thick as to how that could affect my pension! I take it I'd still be due whatever I'd be due for the 19 years however the move to the private sector would likely be a temporary one in order to gain experience to then re-enter the NHS. So say I was to work a year or two in private would it be worthwhile paying into the private company pension and then how would my NHS pension be affected if I were to return with a gap in service?

JoeCrystal

What does your research tell you regarding your questions? It depends on the schemes and how long the break is. I would say, though, you should work out the cost of leaving the NHS pension scheme for one year, whatever the salary you would be on with your private job, especially if it comes with a typical auto-enrollment employer's contribution of 3%....

Let's say you had a job with the NHS and it was at £27k. For that year, it would be index-linked £500 per year for life. If you are 20 years away from retirement age, for example, then that banked pension would be £663 per year in today's terms already. If you then retire and keep living for 20 years, for example, then it would result in an overall pension of £13,260 for one year. 

A job on £27k with a legal minimum DC pension scheme would only require an employer's contribution of £622 (aka 3% of the earnings above £6,240 for the entire year). So yeah, I hope whatever job you are hoping to do is worth the cost of what you will be giving up, even for a short time.

Flugelhorn

I think that a a year after the you leave your pension becomes deferred  - you can restart a pension when you rejoin the NHS - if the 2 pensions are in different sections then they will may calculate and pay  you 2 separate pension amounts when you retire 

hugheskevi

As long as the gap in service is under 5 years, upon rejoining the pension scheme the deferred pension award is cancelled and the whole of your pension is automatically aggregated. So final salary links are returned, and you benefit from enhanced in-service revaluation on the career average pension.

Albermarle

Private sector pensions are typically much worse than the NHS one. Maybe for one year it is not such a big deal, but if it was longer/more permanent, you would probably need an approx  20% increase in salary to compensate.
However even if it is not such a good deal, you should still opt in to the private company pension scheme, as you will still be getting some employer contributions ( 3% minimum but some companies are more generous).

Qyburn

Lots of information here, including about rejoining 
https://pensions.gov.scot/nhs

Moonwolf

Mamalaa said:

I have been working for the NHS and been paying into my pension for 19 years (in Scotland if that makes a difference). I have been looking at jobs in the private sector and am a bit thick as to how that could affect my pension! I take it I'd still be due whatever I'd be due for the 19 years however the move to the private sector would likely be a temporary one in order to gain experience to then re-enter the NHS. So say I was to work a year or two in private would it be worthwhile paying into the private company pension and then how would my NHS pension be affected if I were to return with a gap in service?

It is always worth paying into a pension.  A private pension is not as good as the NHS one but you can use it to add flexibility and as others on here will tell you, pensions are one of the best ways of saving because of the tax benefits and your employer has to add money as well.

On your NHS pension, it becomes deferred when you stop paying it, I haven't checked by happy to take @Flugelhorn
at a year.  A deferred pension will grow at CPI - so I have a 1995 scheme NHS pension that was deferred in 1998 and was worth £2,664 per year - today it is worth £5,600 a year.  

If you go back in less than 5 years you will be able to re-start your pension but if your go back with more than 5 years you will start a new pension and have two different NHS pensions.

Your private pension will be a pot of money, if you don't know the difference google "defined contribution (DC)" and "defined benefits (DC)" schemes. 

You can draw this down form 55 at the moment, but it will be 57 from 2028. 

You can use this to buy an annuity or draw it down as need, you can take 25% of it tax free in one go or as you draw it down. 

I'm in this situation with a deferred NHS pension, another deferred DB pension, a current NHS pension and a DC pot.  I will be using my DC pot to retire early as that suits me.  Others wanting to retire early might take their NHS pension early with a reduction and use their DC pot as a top up. 

rnj

I'll be taking my NHS pension early at a reduced rate which is contrary to general advice here for the following reasons:
- I have other income and will likely be paying high rate tax at 68.
- I have no kids and want more income when younger rather than older (i.e. not wait until 68!)