NHS Pension - worthwhile?

cavenger · 9 May 2017 at 5:58PM

Hello,
I'm in my mid 30's and have recently joined the NHS. I'm debating whether I should try to opt out of the NHS pension or join their alternative scheme. It took me a while to understand the mechanics of the scheme as nobody seemed to know/wanted to say, the gist of it is that you contribute around 12% of your salary and the NHS contributes 14% to make a total contribution of 26%, but your pension pot is worth 2% of your salary, the sweetener being that 2% is guaranteed for life at retirement (assuming the rules don't change).

I've modelled this out in Excel - Assuming I retire at 73, my pension pot would be worth around 22,650 and I would have contributed almost 123K - if I live at least 6 years after retirement I'll break even.

I just wanted to get a second independent opinion if this is worthwhile as I'm wondering if I'd be better off putting 12% of my salary into a FTSE 100 tracker.

Thanks

kidmugsy · 9 May 2017 at 6:01PM

I do not believe it. This post is a leg-pull.

Linton · 9 May 2017 at 6:14PM

You seem to be very confused. What do you mean when you say "your pension pot is worth 2% of your salary"?

If the NHS scheme works out to require 6 times the annual pension as your total contribution then surely if you live more than 6 years after retirement you are gaining from being a member of the NHS scheme. Someone aged 30 now is predicted by the government Office for National Statistics to live on average to 90 or more. So it sounds like a very good deal to me - from your figures you get 17 years for free. And that is not taking into account inflation.

JoeCrystal · 9 May 2017 at 6:15PM

Seriously? Then clearly you need to read more about this scheme and consider yourself to be extraordinary lucky to get such a deal.There is no pension pot, only a Treasury backed promise to pay you a pension when you retire. That is what you are paying peanuts for.

Kynthia · 9 May 2017 at 6:25PM

You'd be guaranteed to receive an amount every year, increasing with inflation, with spousal and dependant benefits, for life no matter how long you live, with no investment risk or any chance of the money running out.

Not many give up the chance of that.

t0rt0ise · 9 May 2017 at 7:43PM

You can't join the alternative scheme if you are eligible for the normal NHS scheme. It is also a CARE scheme so you can't know exactly what you'll get in the end. Not sure where your 2% comes from.

p00hsticks · 9 May 2017 at 7:48PM

I am starting to get seriously scared about ever falling ill in this country given the number of posts we get on these boards about people querying if the NHS pension is worth it.

Let's all just hope that their medical knowledge is considerably better that their financial acumen.

mollycat · 9 May 2017 at 8:04PM

p00hsticks wrote: »

I am starting to get seriously scared about ever falling ill in this country given the number of posts we get on these boards about people querying if the NHS pension is worth it.

Let's all just hope that their medical knowledge is considerably better that their financial acumen.

I've posted this before.....

Hardly anyone in my (NHS) workplace has a clue about their pension.

When anyone is approaching retirement inevitably the talk is of it being a "no brainer" to take the maximum lump sum.

Commutation rate is 12-1 :eek:

People do seem to do their jobs well though despite this "knowledge gap"

dunstonh · 9 May 2017 at 8:06PM

I'm debating whether I should try to opt out of the NHS pension or join their alternative scheme

What alternative is better than the NHS pension? (clue - there isnt one)

took me a while to understand the mechanics of the scheme as nobody seemed to know/wanted to say, the gist of it is that you contribute around 12% of your salary and the NHS contributes 14% to make a total contribution of 26%, but your pension pot is worth 2% of your salary, the sweetener being that 2% is guaranteed for life at retirement (assuming the rules don't change).

No. You havent got it yet. 1) there is no employer contribution. 2) its based on years of service 3) its 100% guaranteed

I've modelled this out in Excel - Assuming I retire at 73, my pension pot would be worth around 22,650 and I would have contributed almost 123K - if I live at least 6 years after retirement I'll break even.

There is no pension pot. It is defined benefit.

I just wanted to get a second independent opinion if this is worthwhile as I'm wondering if I'd be better off putting 12% of my salary into a FTSE 100 tracker.

Investing anything into a FTSE100 tracker is a very bad move. However opting out of the NHS trumps that big time. It would be up there as probably the worst financial decision of your life.

Flugelhorn · 9 May 2017 at 8:11PM

can be worth commutation if reduces lifetime allowance taxation

mollycat · 9 May 2017 at 8:30PM

Flugelhorn wrote: »

can be worth commutation if reduces lifetime allowance taxation

If you're referring to my post (#8), no; people just think they are getting "done" if they don't fully commute.

When I explain to them they are borrowing from their future self under poor terms they don't want to hear it.

Have seen people take the bigger lump sum for this reason, spend a big chunk on car/holidays/etc, then return to work as their retirement income is inadequate.

Each to his/her own I suppose, but it's not my idea of retirement.

NHS Pension - worthwhile?

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