Help understanding NHS pension for someone who has always been (sort of) self employed

OldBeanz

SomeMadeUpName said:

JoeCrystal said:

Or if you got personal pension, transfer it in and don't have to worry about two years limit.

Hi, so yes, I saw that, so....

If she starts work and then gets a few small payments into the scheme under her belt.  She can then transfer in all (or a portion of) her personal pension and that buys her more income in retirement, and by doing that she also 'vests' her entitlement early?

Is that right?

And I assume it's also pretty good value in terms of return (early demise excepted)!

Yes. Transfer in of a pension will ensure an NHS pension. There is a time limit to transfer in (a year for most gov based schemes) and you have to be given the figures for the transfer so if that is what you want to do then start the process as soon as you can.   

JoeCrystal

SomeMadeUpName said:

JoeCrystal said:

Or if you got personal pension, transfer it in and don't have to worry about two years limit.

Hi, so yes, I saw that, so....

If she starts work and then gets a few small payments into the scheme under her belt.  She can then transfer in all (or a portion of) her personal pension and that buys her more income in retirement, and by doing that she also 'vests' her entitlement early?

Is that right?

And I assume it's also pretty good value in terms of return (early demise excepted)!

Yes. NHS staffs are still pretty much paying peanuts for generous benefits.

SomeMadeUpName

OldBeanz said:

SomeMadeUpName said:

JoeCrystal said:

Or if you got personal pension, transfer it in and don't have to worry about two years limit.

Hi, so yes, I saw that, so....

If she starts work and then gets a few small payments into the scheme under her belt.  She can then transfer in all (or a portion of) her personal pension and that buys her more income in retirement, and by doing that she also 'vests' her entitlement early?

Is that right?

And I assume it's also pretty good value in terms of return (early demise excepted)!

Yes. Transfer in of a pension will ensure an NHS pension. There is a time limit to transfer in (a year for most gov based schemes) and you have to be given the figures for the transfer so if that is what you want to do then start the process as soon as you can.   

Would you have to transfer in the full value of a personal pension (eg if my wife had £25k in her pension, could she transfer in only £10k or £15k?  If it has to be all could I open her another SIPP transfer £10k from her existing to that, then all of that to NHS?

SomeMadeUpName

JoeCrystal said:

SomeMadeUpName said:

JoeCrystal said:

Or if you got personal pension, transfer it in and don't have to worry about two years limit.

Hi, so yes, I saw that, so....

If she starts work and then gets a few small payments into the scheme under her belt.  She can then transfer in all (or a portion of) her personal pension and that buys her more income in retirement, and by doing that she also 'vests' her entitlement early?

Is that right?

And I assume it's also pretty good value in terms of return (early demise excepted)!

Yes. NHS staffs are still pretty much paying peanuts for generous benefits.

Yesterday when I used an online calculator for how much buying APCs (additional pension contributions) would cost in to NHS, it seemed to say £1k pa in retirement (with spousal benefit) would cost circa £17k at age 59 (bit older than she is).  Do you know if the income to benefit ratio on transferring in a pension pot is better/same/worse than that by any chance?

QrizB

SomeMadeUpName said:

JoeCrystal said:

SomeMadeUpName said:

JoeCrystal said:

Or if you got personal pension, transfer it in and don't have to worry about two years limit.

Hi, so yes, I saw that, so....

If she starts work and then gets a few small payments into the scheme under her belt.  She can then transfer in all (or a portion of) her personal pension and that buys her more income in retirement, and by doing that she also 'vests' her entitlement early?

Is that right?

And I assume it's also pretty good value in terms of return (early demise excepted)!

Yes. NHS staffs are still pretty much paying peanuts for generous benefits.

Yesterday when I used an online calculator for how much buying APCs (additional pension contributions) would cost in to NHS, it seemed to say £1k pa in retirement (with spousal benefit) would cost circa £17k at age 59 (bit older than she is).  Do you know if the income to benefit ratio on transferring in a pension pot is better/same/worse than that by any chance?

At current annuity rates, a 60 year old would have to pay £21400 to buy a £1k RPI-linked annuity (and that's without a survivor pension). £17k at 59 for CPI linked with survivor seems reasonable, possibly even a bargain.

https://www.hl.co.uk/retirement/annuities/best-buy-rates

MX5huggy

The other option is she gets the NHS job and transfers in some or all her other pensions swapping DC pension for DB pension and then the 2 year vesting period is irrelevant.

You have to do the transfer in the first 12 months of NHS employment. 

SomeMadeUpName

Hello again

Thanks all above for the comments and advice, this with a bit of other research has helped me formulate a plan:

First off to say the property job mentioned in the OP is a bust, waste of time, a right shower she's best well clear of.

So the NHS job is off and rolling.

My plan is to transfer in her DC pot asap, it's about £25k and gets her circa £1,500 pa (index linked) at NPA (which equates to circa 6%) with a 33.75% surviving spouse benefit which seems good value, and has the added benefit of vesting her membership before 2 years in case the job goes away.

I did also look at buying additional NHS pension but (and here's where I'd appreciate a sense check from you guys):

Cost to buy £500pa index linked, and with surviving spouse, at NPA, as a lump sum is £8400 (equates to about 5,95%).  So you think that sounds damn near as good as the transfer right?  However, the NHS scheme gets the 25% uplift of HMRC (so they get £10,500 into their pot).  If instead we put that £8,400 into her personal pension then her DC pot gets the uplift and she has £10,500 in there.  So sacrificing £10,500 to get £500pa is more like a 4.75% annuity purchase which I think is currently sub best on market even with the index linking and spousal.

So we're thinking do the transfer, leave the additional NHS alone. Max contribution her DC (100% of earned income less whatever her employee contribution to NHS works out to be) and hopefully grow her DC pot to circa £50k (plus growth) over 4 years. 

Does that seem like a plan, or am I missing something?

Thanks as ever

BTW, I'm ignorant in this area (pensions) or maybe worse than that, as I know some things and NOT others, so I don't contribute much here.  I do however answer peoples questions and help them where I can on other areas of this forum, and other forums where I have good knowledge to share.  I promise I'm a radiator, not just a drain. 

Dazed_and_C0nfused

Cost to buy £500pa index linked, and with surviving spouse, at NPA, as a lump sum is £8400 (equates to about 5,95%). So you think that sounds damn near as good as the transfer right? However, the NHS scheme gets the 25% uplift of HMRC (so they get £10,500 into their pot). If instead we put that £8,400 into her personal pension then her DC pot gets the uplift and she has £10,500 in there. So sacrificing £10,500 to get £500pa is more like a 4.75% annuity purchase which I think is currently sub best on market even with the index linking and spousal.

I think you have got confused there.

There is no "pot" with the NHS scheme, she is buying extra defined benefit pension.

If she pays a lump sum to the NHS is it not more likely that she could then claim tax relief from HMRC, so the real cost of paying £8,400 might only be £6,720.

If she paid £8,400 to a DC scheme using relief at source then yes, she would end up with a "pot" with £10,500 in it.

Marcon

Dazed_and_C0nfused said:

Cost to buy £500pa index linked, and with surviving spouse, at NPA, as a lump sum is £8400 (equates to about 5,95%). So you think that sounds damn near as good as the transfer right? However, the NHS scheme gets the 25% uplift of HMRC (so they get £10,500 into their pot). If instead we put that £8,400 into her personal pension then her DC pot gets the uplift and she has £10,500 in there. So sacrificing £10,500 to get £500pa is more like a 4.75% annuity purchase which I think is currently sub best on market even with the index linking and spousal.

I think you have got confused there.

There is no "pot" with the NHS scheme, she is buying extra defined benefit pension.

If she pays a lump sum to the NHS is it not more likely that she could then claim tax relief from HMRC, so the real cost of paying £8,400 might only be £6,720.

If she paid £8,400 to a DC scheme using relief at source then yes, she would end up with a "pot" with £10,500 in it.

It's easier to understand a sentence which is positive (quite enough confusion in the arcane world of pensions!) so why not: 

If she pays a lump sum to the NHS she could claim tax relief from HMRC, so the real cost of paying £8,400 might only be £6,720.

ggmf

One thing I would add is presumably she is or will join the 2015 scheme, hence any benefits built up would not become payable (without reduction) until her state pension age.

With a SIPP she can take that earlier i.e currently 55 yrs, but the available age will increase in coming years, if she decides she has had enough and wants to retire earlier.