Opting out of NHS Pension

Coolrunnings · 22 November 2018 at 9:03AM

Paul_Herring wrote: »

As a tax payer, I should probably thank you for it, but I'm fairly certain those working in the NHS certainly wouldn't.

The pension is currently net cash positive, meaning they are receiving more contributions than they are paying out. So no, as a tax payer you should want people to stay in the scheme. Is everything you say just totally and completely inaccurate?

crv1963 · 22 November 2018 at 11:18AM

Coolrunnings wrote: »

The pension is currently net cash positive, meaning they are receiving more contributions than they are paying out. So no, as a tax payer you should want people to stay in the scheme. Is everything you say just totally and completely inaccurate?

I think you are wrong. As a long time member of the NHS scheme, I for one believe strongly that people who are eligible to join it should.

If it was such a good deal for the taxpayer as in contributions are in surplus to payments out then there would have been no need for the reforms that have happened to date. The whole point of the reforms and negotiations to date have been to reduce the cost to the taxpayer in the longer term. Even incompetent politicians don't pick fights with a large number of their voters unless they see a big problem on the horizon.

To encourage people to leave what is regarded as a good scheme with a security of knowing exactly what they will get at the point of retirement is at best silly and at worst damaging and irresponsible. Few public sector employees actually retire with full pensions, a huge number of scheme members are either part time or lower paid or both.

Add in the now cost of getting their qualifications (and maintaining them) then for most NHS employees the scheme offers remarkable value for money. I think that many people read headline figures such as consultants earning £150k+ pa and equate this to all consultants, or nurses earn £50k pa. Yes some do, but crucially most do not.

In comparing the DB scheme with a DC scheme you are comparing apples to oranges.

Regardless of what the future changes may be to age or taxable status you can only work on what is in front of you or available now. So if you can join a DB scheme, not dependent on the markets in any profession you'd be mad not to join.

hyubh · 23 November 2018 at 9:10PM

Coolrunnings wrote: »

!!!!!! the scheme doesn't even invest its money! It is literally a (rapidly shrinking) ponzi scheme!

No, it's a 'pay as you go' scheme. It doesn't need more and more members, and no one is being fooled that their money is being invested; it just needs a minimally functioning government to levy the taxes from which the unfunded pension promises are designed to be paid out of.

Coolrunnings wrote: »

The pension is currently net cash positive, meaning they are receiving more contributions than they are paying out. So no, as a tax payer you should want people to stay in the scheme.

You can't seriously value a DB scheme's liabilities by looking at cashflow (i.e. current payments, rather than future payments likely to be due from current pension promises). Although, that would give sense to the idea of seeing a pay-as-you-go scheme as a 'ponzi' scheme...

hugheskevi · 23 November 2018 at 10:25PM

To pick up on a couple of things that haven't been mentioned

My calculations assume that the couple both live to 90, far exceeding their actuarial life expectancy for the sake of conservatism.

Age 90 is actually a fairly central estimate, and certainly not 'far exceeding' their expectancy. Page 17 of the Pension Regulator's analysis of scheme funding statistics states

Figures 9a and 9b show the distribution of assumed life expectancies for future pensioners aged 45 (male and female) respectively, for Tranches 2, 5, 8 and 11. At the median, the assumed life expectancy of a future male pensioner currently aged 45 for Tranches 8 and 11 is 89.9 and 89.7 years, respectively. Similarly, the median life expectancy of a future female pensioner currently aged 45 for Tranches 8 and 11 is 92.3 and 91.9 years respectively. The median life expectancy assumption for future pensioner males (females) in Tranche 11 is higher than the corresponding assumption for Tranche 2 by over 1.7 years (1.1 years).

- Deterioration of NHS pension (has been downgraded twice in the last 13 years...looks likely to continue)

The latest direction of policy change is completely the opposite. A written Ministerial statement in September 2018 stated:

Our initial results show that the protections in the new cost cap mechanism mean public sector workers will get improved pension benefits for employment over the period April 2019 to March 2023.

SciroccoGT2 · 20 February 2019 at 3:47PM

Hi Folks. I have a slightly different situation to the OP and I am also considering opting out of the NHS pension....but , before everyone rolls eyes and shakes their head..let me explain.

In 1996 after 12 years in the RAF I joined the NHS. I transferred my MOD pension into the NHS pot and got 13 years and 70 days of credit. I was told I could retire on a full pension (40/80ths) aged 57.
A few years later the government decided to !!!! around with the NHS pension , but it was a Voluntary offer....those in my situation had a choice to move to a different pension system. I decided to stay in the 1995 pension.
Fast forward to 2015 and again the government decided to !!!! with our pensions , but this time I was forced to move across to the new system and my (just under 32 years of contributions) old pot was frozen (a bit like our pay for 8 years!).
So, 4 years on I now have to work until at least 60 (old scheme) before I can retire, and I am currently paying £280 per month into the new (not improved!) scheme, which I cannot access until 67.
Maximum I can bank in new scheme is 11 years of contributions BUT I won't be able to draw till 67.
Due to personal circumstances (Chronic Leukaemia) I don't really want to work until 67 as I would like a little time at least to enjoy retirement :beer:.

So. This is my plan. Please feel free to point out any errors I have made in my assumptions !

Opt out of the new scheme...after tax (20%) I should see an additional £224 per month in my pay packet.

Overpay my current mortgage by £200 per month (There is just over 4 years to run on it currently...overpay will cut to around 2 years 4 moths).

Pay off mortgage by the time I am 55...re-join pension for final 5 years (or not, depending upon situation) , mortgage free and £650/£850 per month better off !

Retire at 60 with old pension lump sum and pension.

I have a private life insurance policy through Prudential which gives me £62'000 of cover , costs me £10 per month)

This is the theory....anyone spot any serious errors in my logic ?

Have a nice day folks :j

JoeCrystal · 20 February 2019 at 3:51PM

You should post this on the main pension forum since hardly anyone goes into auto-enrolment forum. Hmm, I would say you are still crazy to opt out of the NHS pension scheme. There is Ill health retirement you may be able to take advantage of plus death in service benefit as well off the top of my head.

dunstonh · 22 February 2019 at 1:33PM

Opt out of the new scheme...after tax (20%) I should see an additional £224 per month in my pay packet.

Dont forget that you are not just taxed on the contribution amount you would have paid but also suffer NI.

Overpay my current mortgage by £200 per month (There is just over 4 years to run on it currently...overpay will cut to around 2 years 4 moths).

The pension absolutely wipes the floor in terms of financial benefit vs repaying the mortgage early.

Pay off mortgage by the time I am 55...re-join pension for final 5 years (or not, depending upon situation) , mortgage free and £650/£850 per month better off !

A decision that is likely to cost you thousands, if not tens of thousands of pounds.

This is the theory....anyone spot any serious errors in my logic ?

Absolutely barmy. Taxpayers will thank you but you would be crazy to opt out.

hugheskevi · 22 February 2019 at 1:51PM

I was forced to move across to the new system and my (just under 32 years of contributions) old pot was frozen (a bit like our pay for 8 years!).

It isn't frozen, rather, the pension remains linked to final salary but you no longer build up additional qualifying years.

I now have to work until at least 60 (old scheme) before I can retire

You can access the pension with actuarial reduction before the normal pension age of 60. The minimum pension age will be 50 or 55.

I am currently paying £280 per month into the new (not improved!) scheme, which I cannot access until 67.

The pension can be accessed with actuarial reduction from age 55.

Opt out of the new scheme...after tax (20%) I should see an additional £224 per month in my pay packet.

Overpay my current mortgage by £200 per month (There is just over 4 years to run on it currently...overpay will cut to around 2 years 4 moths).

Pay off mortgage by the time I am 55...re-join pension for final 5 years (or not, depending upon situation) , mortgage free and £650/£850 per month better off !

Retire at 60 with old pension lump sum and pension.

So you are now aged 52 and plan to retire at 60. Opting out of the pension marginally increases resources available in the short-term, at great detriment to resources available in longer term.

I can't see why you would want to put such priority on paying mortgage and losing the valuable pension benefit when there doesn't appear to be any need to do so? Why not just pay off mortgage as normal, it will all be paid off well before retirement.

I have a private life insurance policy through Prudential which gives me £62'000 of cover , costs me £10 per month)

Your NHS pension gives a lump sum of at least 2*salary if you die in service, as well as valuable benefits in the event that you suffer ill-health and either cannot do you current job or do even do any job.

Dont forget that you are not just taxed on the contribution amount you would have paid but also suffer NI.

As the NHS pension scheme is not salary sacrifice, the same amount of NI is paid whether the member is in the scheme or not.

Pension_Geek · 22 February 2019 at 2:20PM

The only time I wish I was a doctor is when I read about the NHS pension.

Just to clarify as well, I think the CARE (2015) scheme only allows retirement up to 3 years early, but that’s based on what my cousins husband told me so may not be true.

hugheskevi · 22 February 2019 at 2:22PM

Just to clarify as well, I think the CARE (2015) scheme only allows retirement up to 3 years early, but that’s based on what my cousins husband told me so may not be true.

You can make voluntary contributions to reduce the age from which unreduced pension benefits are paid by up to 3 years, subject to a minimum of age 65 (ERRBO).

The pension can be commenced with actuarial reduction at any point after age 55.

Opting out of NHS Pension

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