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Opting out of NHS Pension

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  • csgohan4
    csgohan4 Posts: 10,587 Forumite
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    Coolrunnings wrote: »
    These maths are so very wrong



    Have considered the extra tax on exceeding the annual allowance which is very real when your earning more as a Consultant in the medium to long term?? That must not be underestimated.
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"

    G_M/ Bowlhead99 RIP
  • Coolrunnings
    Coolrunnings Posts: 13 Forumite
    Paul_Herring wrote: »
    You're just trolling, aren't you?

    Post you quoted gave 2.11% for a 58 yr old with joint life, 5 year guarantee.

    Gives 2.25% for a 55 yr old, joint life, no guarantee:



    I suggest you either find somewhere else to troll, or at least be a little less obvious about it if you're going to stick around here.

    I'm not saying your rates were inaccurate, just terrible vs the commonly accepted retirement wisdom as outlined in my above post
  • Coolrunnings
    Coolrunnings Posts: 13 Forumite
    csgohan4 wrote: »
    Have considered the extra tax on exceeding the annual allowance which is very real when your earning more as a Consultant in the medium to long term?? That must not be underestimated.

    Good point. What's the difference here? 3-4k pa?
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    Your personal definition of 'commonly accepted' with regard to joint life, indexed linked, and/or guaranteed wrt pensions needs some calibration it seems, since none of them apply with your calculations based, as they are, on drawdown. Which is not guaranteed, runs the risk of running out if blindly increasing by inflation, and you seem to be ignoring the widow(er.)
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Coolrunnings
    Coolrunnings Posts: 13 Forumite
    Paul_Herring wrote: »
    Your personal definition of 'commonly accepted' with regard to joint life, indexed linked, and/or guaranteed wrt pensions needs some calibration it seems, since none of them apply with your calculations based, as they are, on drawdown. Which is not guaranteed, runs the risk of running out if blindly increasing by inflation, and you seem to be ignoring the widow(er.)


    Have a read of the Trinity Study.
  • csgohan4
    csgohan4 Posts: 10,587 Forumite
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    edited 21 November 2018 at 8:23PM
    Coolrunnings wrote: »
    Good point. What's the difference here? 3-4k pa?



    LOL you got to be having a laugh, I had a colleague with at least 50k tax bill with just under half of that being the AA tax charge/ over tapered allowance, I think your putting things too simplistic.


    If you can afford it, remain the pension, as the longer your out means less contributions and less average earnings to get a high enough pension


    Have a look at the examples, I wish I could pay 3-4 K for my AA charge


    example :
    https://www.nhsbsa.nhs.uk/sites/default/files/2018-07/2016-2017%20Tapered%20Annual%20Allowance%20Example-20180710-%28V4%29.pdf
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"

    G_M/ Bowlhead99 RIP
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    Coolrunnings wrote: »
    Have a read of the Trinity Study.

    Yes. It relates to drawdown. Which the NHS pension isn't.

    (It's also US centric, and is commonly derided as too simplistic.)

    That's not to say the principle is wrong, but you're comparing apples to stepladders here, and complaining that people aren't trying to keep the doctor away, when what they're trying to do is pick fruit.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • HappyHarry
    HappyHarry Posts: 1,575 Forumite
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    Coolrunnings wrote: »
    That's a terrible annuity rate.

    Think logically. If you and your spouse exceed current life expectancy dramatically and live to 90, that's 32 years x 31.6k = 1,011k. What are you paying the extra 500k for? That's a hell of a premium for a 5 year inflation guarantee when you can get the same thing in the market very easily.

    The implied withdrawal rate of that annuity is 2%, and this leaves your portfolio fully depleted when you die. Conventional retirement wisdom discusses a 3-4% safe withdrawal rate, meaning your pot is very likely to still be fully intact when you die. Using 3.5% SWR and 31.6k gives 902k required pot size.

    I believe at 6% real return this would require around a 500pm saving, far less than the NHS would take (beyond the first 8-10y as a junior doctor). And unlike an annuity or your NHS pension you'd likely leave behind at least 900k for your family or charity.

    Ok, let's clarify this.

    I'm talking about purchasing an annuity. This is a guaranteed income for life to replace the NHS pension, which is a guaranteed income for life.

    Yes, the annuity rate is rubbish, but that is what it is.

    I'm illustrating a lifetime annuity, that rises with inflation forever, that pays a 50% spouses pension on death, and guarantees to pay out for a minimum of 5 years even if both parties die before then.

    You are disparaging in your comments, and totally ignore the impact of inflation over what could've expected to be 28 years of retirement.

    Please, don't try and put people off the NHS scheme, it is the most beneficial pension scheme they will ever have the opportunity to have. You are risking seriously damaging people's financial future with your incorrect assumptions and poor understanding of pensions, longevity and inflation.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • JoeCrystal
    JoeCrystal Posts: 3,010 Forumite
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    Coolrunnings wrote: »
    These maths are so very wrong

    Which maths is so very wrong? Care to explain? ;) I generally used HL pension calculator to work up some figures. Sure, it does have its flaws but for working out what we need to pay into a DC pension scheme to get an index-linked annuity with 50% spouse, it is reasonable as it is the best comparison one can do. I really do not want to go into drawdown option since that is not the point of this topic.

    The simple fact is that Opting Out is just plain crazy, especially for someone on a high salary and able to pay for the benefit before tax. 9.3% is an excellent value for the benefits you get from the NHS scheme.
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    Which maths is so very wrong?

    You're 'wrong' because you're giving far-too-sensible numbers for an annuity to compare with the NHS scheme, when apparently the only thing to do with a pension pot is to use drawdown. Starting at 4%. With inflation.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
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