NHS pension

20122013

I have accepted an NHS job offer, and one of the questions on the starter pack says:
'Do you have any previous pension rights that you might be interested in transferring into the NHS pension scheme?' I would like to know what this means.

As I have an old work pension (non-NHS on the Scottish Widow platform) and I was also employed by the NHS where I built up 18 months of pension, but I have four months to make up before I am qualified to join the NHS pension scheme. Should I include these on the form ?

Regarding the transfer time frame would I still be eligible as I left the NHS over 12 months ago,

QrizB

I'd definitely mention you previous NHS service, as (per your previous threads) you need to rejoin before September this year if you're to keep your existing credits.

It's up to you whether you also want to transfer your SW pension in and convert it into NHS pension. I think the NHS will give you a quote for what it would buy in the NHS scheme, and then you can decide whether to transfer or not.

20122013

https://forums.moneysavingexpert.com/discussion/comment/82072869#Comment_82072869

Appreciate your prompt reply.

20122013

I am planning ahead before my unconditional NHS offer arrives. I need to complete the final four months of my 24-month qualifying period by
September, but I am worried about missing the September payroll deadline.

Since the core NHS scheme has fixed contribution rates, I would like toknow if I can maximise my retirement savings by using (AI has suggested :

‘1. Additional Pension (AP): Buying extra guaranteed income via a cash lump sum or payroll deductions.
2. MPAVCs: Funneling large portions of my salary into an in-house AVC pot (e.g., Prudential or Standard Life).
3. A Private SIPP: Paying my cash savings directly into a personal pension alongside the NHS scheme.’

Given my current NHS Band, I am well below the £60,000 Annual Allowance. I have enough cash to cover my living expenses for some years, so is
sacrificing 100% of my salary viable under these options, and which SIPP platforms would suit this approach? And will the tax I pay upon
withdraw be less than if I had invested the unwrapped salary into equities? (as I have not ISA allowance remaining)

Lowtrawler

All 3 of the options suggested by AI are possible as means to enhance your pension. It is probably worth considering Additional Pension in a different category to the other 2 options.

Additional Pension is an extension to your defined Benefit arrangement. You purchase additional pension in increments of £250 either by lump sum or by monthly salary deduction. and the £250 grows annually by CPI to September each year. The precise cost of doing this varies by age and whether you wish a dependent to receive benefits in the event of your death. Generally, it works out around £17 gross for each £1 and so is good value compared to buying a similar guaranteed income on the open market. There is also a maximum limit you can buy during your pension membership. If you want extra guaranteed pension income, this is an attractive option. You did not mention ERBO but that is another option which buys you the right to retire earlier than your normal retirement age without an actuarial deduction to your pension.

AVC's and SIPP are both defined contribution arrangements and will deliver a return based on how the underlying investments perform.

You mention putting 100% of your pay into pensions. For additional pension and ERBO, this is not likely to be sensible as you will be putting at least £12,570 of untaxed income into a pension that will ultimately be taxed. However, if you were to put sufficient salary into Additional Pension to keep you above your tax free allowance, you could then put 80% of your remaining salary into a SIPP where the SIPP provider would then claim tax back and add it to your SIPP pot, even though you were not taxed on it in the first place. Whether you could do this with AVC's would depend on whether you were paying through NHS payroll or outside payroll.

As you likely already know, you will be limited in what you contribute each year by the size of your earned income (as this is below £60k). You may be able to contribute more if you have unused allowance from the last 3 years.

If you were to invest through a SIPP and are a 20% taxpayer in retirement, after 25% Pension Commencement Lump Sum (PCLS), the remaining pension will be subject to tax at 20%, the net tax benefit of wrapping into a pension will be a few percent (5/6%) and you will lose flexibility on when the money is available for you to use. Hence, for most people it is not worth applying savings held elsewhere into a pension in order to gain a 5/6% advantage given loss of flexibility and uncertainty over future tax rules.

Moonwolf

These are all the NHS supported ways of increasing your pension. https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

If you pay any higher rate tax then these have the benefit you don’t have to claim that tax back from HMRC.

You could also as you have seen use a SIPP or other private pension vehicle. I paid into my old BT group pension and took out ERRBO which meant I could take my 2015 pension earlier with a smaller reduction. I have written a long post on here before about this but I need to revisit it as it is bit out of date now.

LHW99

As you likely already know, you will be limited in what you contribute
each year by the size of your earned income (as this is below £60k). You
may be able to contribute more if you have unused allowance from the
last 3 years.

Thought this would only be available if you earned more than £60k in a year?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82081407#Comment_82081407

For a DC scheme you would have to allow for the employer contributions as well when looking at the £60k annual allowance. With a DB scheme like the NHS scheme it gets a bit more complicated. So it is not impossible to use carry forward if your taxable earnings are under £60k but it would be unlikely.

20122013

https://forums.moneysavingexpert.com/discussion/comment/82079379#Comment_82079379

Appreciate your informative reply, I am still trying to work out what to do as I will have some bank interests which may take me up to the higher tax band…

Purplelady65

As the NHS scheme is a defined benefit scheme your usage of the annual allowance will be calculated via the pension input amount (PIA). This is not based on what you and your employer have paid in but on the increase in the value of the pension each year x 16 less inflation. If you go to the NHSBA website and google pension input amount there are some factsheets you can download.

Moonwolf

https://forums.moneysavingexpert.com/discussion/comment/82082138#Comment_82082138

This means that ERRBO doesn’t impact the annual allowance because it affects when the pension is paid at full value but not the value of the pension for annual allowance calculations. Other additional pensions do usually affect the annual allowance.

Of course you don’t need to confine yourself to one option, you could blend them for the best results.