Is it worth me contributing to another pension for 20 years? NHS

JDE90

Hi,

I'm in my late 20s and for the past two years haven't contributed through my main employment due to the type of job that it is not being eligible.

I've had some casual NHS work and contributed to the NHS Pension. It looks like my career is now going to move long term to the NHS. I want to maximise my pension for when I'm older and want to start an AVC when I can. If I only contributed to an additional pension for even only 20 years, would that still be worth it?

As I get older, I'm worrying more about these things but want to balance it with the "is it worth it?"

Any advice, questions for me to consider or thoughts would be appreciated.

Cobbler_tone

100% yes. At your age it is difficult to reconcile with being your future self but not only is it tax efficient, you'll get employer contributions and it will build nicely.

GunJack

If you're going to be NHS, make sure you do 2 things:-

1. Rejoin the main NHS pension, and 
2. Check all the AVC/APC options available within the NHS scheme before looking elsewhere so you at least you know what you're comparing with.

It may be worth opening a sipp to run alongside the NHS scheme, to bridge the gap between retiring and the NHS pension being due without any early retirement reductions.

I'm sure some of the NHS experts will comment too...

GunJack

Cobbler_tone said:

100% yes. At your age it is difficult to reconcile with being your future self but not only is it tax efficient, you'll get employer contributions and it will build nicely.

It doesn't work like that, the NHS is a DB CARE pension, you were implying a DC scheme.

Cobbler_tone

GunJack said:

Cobbler_tone said:

100% yes. At your age it is difficult to reconcile with being your future self but not only is it tax efficient, you'll get employer contributions and it will build nicely.

It doesn't work like that, the NHS is a DB CARE pension, you were implying a DC scheme.

Even better. The employer will be contributing even more. The employer contributions into mine worked out around 49%. You'd have to be crazy not to join an active DB scheme, although too late for me to change careers. Looks like (with reduction factors) you can access it from 55 too. I'd definitely be filling the application form in.

JDE90

GunJack said:

If you're going to be NHS, make sure you do 2 things:-

1. Rejoin the main NHS pension, and 
2. Check all the AVC/APC options available within the NHS scheme before looking elsewhere so you at least you know what you're comparing with.

It may be worth opening a sipp to run alongside the NHS scheme, to bridge the gap between retiring and the NHS pension being due without any early retirement reductions.

I'm sure some of the NHS experts will comment too...

Thanks for taking the time to reply. I intend to resume NHS contributions once I fully start back in NHS employment. I'm currently working for NHSP which attracts the Royal London pension (as I understand) but will also be looking to get back into NHS proper.

The reason I've had no pension for two years is due to a unique employment which doesn't attract any pension and is not legally required to auto-enrol. I should have sorted a private one out, but hey ho.

I've looked at NHS AVC's and Additional Pension buying and I'd probably like to maximise them. I don't really understand how DB works in terms of increasing contributions as surely it doesn't matter/isn't possible to increase contributions as it is DB CARE. Apologies if I've misunderstood it.

I also have four years worth of LGPS contributions from working in Further Education. I'm unlikely to return to Education in any sense thay would attract LGPS. If I did return to FE, it would be in a teaching capacity and would attract the Teacher's Pension. This wouldn't be for many, many years.

Not sure what a SIPP is but I will look into it.

Cobbler_tone

A SIPP (Self-Invested Personal Pension - Defined contribution pension) and AVC's (DC with the attached provider) will be pots of cash that give you flexibility when you get there. i.e. take the lot at once, buy an annuity (another pension) or draw it down flexibly over time. Your DB NHS one will give you a guaranteed return over time, depending how many years you pay in.

Sarahspangles

JDE90 said:

GunJack said:

If you're going to be NHS, make sure you do 2 things:-

1. Rejoin the main NHS pension, and 
2. Check all the AVC/APC options available within the NHS scheme before looking elsewhere so you at least you know what you're comparing with.

It may be worth opening a sipp to run alongside the NHS scheme, to bridge the gap between retiring and the NHS pension being due without any early retirement reductions.

I'm sure some of the NHS experts will comment too...

Thanks for taking the time to reply. I intend to resume NHS contributions once I fully start back in NHS employment. I'm currently working for NHSP which attracts the Royal London pension (as I understand) but will also be looking to get back into NHS proper.

The reason I've had no pension for two years is due to a unique employment which doesn't attract any pension and is not legally required to auto-enrol. I should have sorted a private one out, but hey ho.

I've looked at NHS AVC's and Additional Pension buying and I'd probably like to maximise them. I don't really understand how DB works in terms of increasing contributions as surely it doesn't matter/isn't possible to increase contributions as it is DB CARE. Apologies if I've misunderstood it.

I also have four years worth of LGPS contributions from working in Further Education. I'm unlikely to return to Education in any sense thay would attract LGPS. If I did return to FE, it would be in a teaching capacity and would attract the Teacher's Pension. This wouldn't be for many, many years.

Not sure what a SIPP is but I will look into it.

The NHS 2015 Care scheme is a good one, currently your accruing pension pot* is revalued by RPI plus 1.5% as long as you remain employed, which beats inflation.

There may be an option to transfer in your LGPS service but there are pros and cons a young’un like you may not foresee, such as being knackered in your late 50s and deciding to take one pension to allow you to go part time or retire early (DAMHIK). It’s not a problem to have multiple DB pensions, they’re mostly set up so you can have online access to your deferred statements.

* Whenever the NHS pension scheme comes up, someone will point out that it’s unfunded i.e. future tax receipts pay the pensioners, so there isn’t a pot of money with your name on it in the same way as there is with defined contribution schemes - but the NHS pension docs/teams do describe it as a pot, so it’s helpful to understand the distinction, depending on your audience. 

AlanP_2

You may also have the option of buying additional NHS DB pension with your Royal London DC pot.

You would need to request that your NHS pension admin team contact RL for a valuation that they then use to calculate how much that would buy in their scheme.

There is normally a time limit from date of joining on when this process can be initiated, 12 months for LGPS as an example.

crv1963

Is it worth it? - Absolutely yes! NHS 2015 scheme accrues 1/54th of salary in your "pot" (although as pointed out there is no real pot, it is a Govt promise to pay you this amount annually for the rest of your life). This costs you a varying amount depending on your pay Band. The NHS Employer pays 23.7% into this pot. In reality this again is a promise to pay as existing contributions are used to pay existing NHS pensioners.

The hypothetical pot or promise to pay is uprated annually by the rate of inflation plus 1.5%.

There are a number of other benefits such as enhanced sick pay -way above SP level it is 6 months full pay followed by 6 months half pay if you do become ill, there is "Death in Service Benefit" which I'm not sure under the 2015 scheme but believe it is twice your annual salary, there is Survivor Salary, which is 33% pensionable pay for the rest of the survivors life plus additional pension paid to children up to age 23 years if in education, for life if dependent on you such as severe disablement.

So the above is the benefit to you and yours, the following are some options to increase pension/ take early-

ERREBO you pay an additional percentage contribution and can retire earlier than Pensionable age, this is an ongoing percentage, the younger you start the less expensive it is.

Additional pension- this can be purchased in blocks of £250, this can either be one off lump sum payment or as a fixed amount on a monthly basis for a set amount of time. 

AVC- these can be salary deducted as is the main scheme, there are two recognised providers Prudential and Standard Life, NHS has negotiated a reduced cost for staff accessing these schemes, as someone earlier points out a second string provides options to currently take earlier and allow choices in terms of hours worked or earlier retirement.

LGPS- This can be transferred into NHS Scheme as long as it is within 12 months of joining NHS scheme.

SIPP- worth having a look at if you plan to save more/ retire earlier than SPA or simply want some eggs in another basket.

NHS Scheme you can retire early with a percentage reduction in Pension to reflect that it will be in payment for an increased number of years.

Further information is on the NHS Business Authority website, or Google NHS pension, it seems really complex but in reality it isn't and of course being Govt backed carries less risk than those saving into a DC pension and much better employer contributions.

Good Luck!

Moonwolf

Simple answer yes.

These were my thoughts some time ago on additional pension for an NHS employee, a bit out of date now, for example the lifetime allowance has gone but still valid.  https://forums.moneysavingexpert.com/discussion/comment/78669411#Comment_78669411

I have a fairly big pension pot now, separate to my NHS pension and I am very glad of the flexibility that gives me. I still have a safe guaranteed NHS pension.