Can anyone help me with private pensions?

[KitKat1985]

Hello lovely Mumsnetters.

An anyone give me any advice on private pensions. I'm 35 and work as a nurse. I have being paying into my NHS work pension for 11 years now but have recently been thinking about trying to put a small amount away each month into a private pension fund too (ideally I'd like to be able to leave full time work at 60).

I don't have lots to put in each month (was thinking of about £100 a month, and maybe increase later in time). Is there any companies that will be okay with putting away such a relatively small amount each month? Also do you have to decide in advance whether you would want an annuity pension or a drawdown pension? And which is generally considered better? I always thought of having an annuity with a pension but I'm wondering whether it would be better to just have an annuity set up with my workplace pension (so that I know I always have some money coming in regularly), and have drawdown on my own pension so I can access larger sums of cash after retirement to be used as and when needed (e.g, to get a car, for house repairs etc)? Also as I understand with drawdown pension if I were to die younger than expected the remaining fund would be passed to DH / the kids, rather than just lost?

Many thanks.

@KitKat1985 not Wealthify. I have a pension app through Smart Pension (workplace pension, not sure if they also do SIPPs) and my S&S ISA is also app based and with Nutmeg. Both are easy to use and straightforward.

@ListeningQuietly

BUT The OP's main pension is DB so her returns are NOT affected by the stock market she does NOT have a pension pot she CANNOT draw down at 55

She can access her pension from age 55 though. The pension statement she gets each year is based on the scheme retirement age of 68, so claiming it earlier just means she'll get less (you should be able to find out how much - or work it out yourself based on however many years of service you'll have).

So work out how much you'd get if you retired at 60, and do what you can now to make sure that is enough, so overpay mortgage to ensure it's paid off by then etc.

Thank you @Pepperwand. Will look into Nutmeg.

I wouldn't take your nhs pension from 55 - the actuarial reduction on the 1995 scheme with retirement age 60, is pretty hefty, I shudder to think what it's like on the current scheme. And it's forever - you don't go up to the 'full' amount when you hit the proper scheme-end age.

No I totally understand @Walkacrossthesand. My plan (hope?) is to put enough aside in a private pension fund to fund me retiring from full-time at 60 (with maybe some bank work as and when I want it to top it up) and then take my NHS pension once I hit NHS retirement age.

You should get an annual statement for your NHS pension. This will set out what you have banked and your potential pension at the pension age for each pension.

You can use the figures to work out what happens if you take each pension early or at retirement age.

A DB pension is known as a ‘gold plated’ pension because you know what you will get at retirement.

Plan ahead and use a gross to net pay calculator - this can help you work out your potential net pension. Remember when you draw your pension you will not be paying NI or pension contributions and should have no mortgage. This means you can maintain a standard of living on a lower gross pension than gross salary.

Whilst taking a pension early can seem like a huge sacrifice of income when you work it out you can find you break even at 80. For example a reduced pension of £15,000 at 60 is 20 years x £15,000 = £300,000 but a full pension of £25,000 at 68 is 12 years x £25,000 = £300,000. One gives you 20 years of retirement the other just 12.

You may also have heard about the McCloud judgement this is going to impact on your NHS pensions. It’s complex but there will be more information over the next 18 months. Make sure you find out as much about this as possible - look at the nhs pensions website and talk to you TU as they will help you make a decision.

Given your age and the McCloud judgement I would focus on paying off your mortgage as this can save thousands. Then look at options with your nhs pension of investing more money in the proposed post 2022 DB scheme.

But there might be a silver lining for your DB pension if you were in it in 2012 and still in 2015.

The McCloud judgement which is being applied to all public sector pension which moved workers to career average (with the higher pension age of state pension age) means workers who were there between the decision in 2012 and start if the new scheme in 2015, will have a choice to have the period 2015-22 as part of the old final salary scheme (with younger pension age..prob 60 or 65 depending on when you joined) or to remain in the career average. It's because older workers were allowed to remain in the old, favourable schemes and it has been deemed as age discrimination against younger workers.

So, you might find that a bigger chunk of pension becomes available to you at 60 than you thought, and you need less bridging funding to state pension age. Do you think you might benefit from this?

The McCloud judgement which is being applied to all public sector pension which moved workers to career average

Tell me more! Am in similar DB scheme which moved to career average a couple of years ago.

Though technically we're not public sector...

www.civilservicepensionscheme.org.uk/members/mccloud-judgment/mccloud-faqs/

www.gov.uk/government/news/special-feature-gad-support-for-mccloud-remedy

Just a small note here, but access to pensions is changing soon to match up with the increasing state pension ages. So OP won't be able to access at 55, she will be accessing at 58 if her pension age is 68.

Probably a good idea to visit an independent financial advisor to discuss pension options.

Thank you for all of the info on the McCloud judgement. That's really useful to know thank you.

This is interesting - I’m in a similar position.

My NHS Pension advisor (employed by the NHS) says they can’t give advice but the IFA I saw said they can’t advise on public sector pensions. . So where do I go?!

Possible useful link:

www.pensionsadvisoryservice.org.uk/

IFAs have been fined to oblivion for pulling people out of DB pensions
and rightly so

If you have a DB
then your best bet is to clear mortgage
pay into ISA
and maybe do AVCs
but do nothing to interfere with the DB pension

@Covidasaurus
legally no one can give you advice on what you should do, you have to make any decisions on your own.

What you can get is information, hopefully in plain English, setting out how your pension scheme(s) work I.e. Benefits and impacts on your entitlement. The two best sources will be your pension provider and your trade union.

@Dramalady52

Just a small note here, but access to pensions is changing soon to match up with the increasing state pension ages. So OP won't be able to access at 55, she will be accessing at 58 if her pension age is 68.

Probably a good idea to visit an independent financial advisor to discuss pension options.

That's useful to know thanks.

Margaritatime of course IFAs can legally give advice, that’s literally the point of them!!

However you need to find an IFA who understands public sector pensions - not all of them do. And as a pp said if you’re looking for advice for transferring out of a public sector pension it will be hard to find an advisor that will agree that this is the best course of action except in some very specific circumstances (or because it’s a scam).

@ChessieFL
IFAs can’t tell someone what to do, they can just set out the options, pros and cons etc. Individuals have to make the decision on what to do on their own.

No, they Advise
its in the job description
Independent Financial Adviser

It’s obviously open to the client not to take the IFA’s advice if they want but usually the reason people go to advisors is because they want someone to tell them what to do! IFAs may set out the pros and cons of different options but they will still state what option they advise you to choose.

A properly qualified IFA who has the necessary permissions to advise on DB schemes can of course give advice. That is what they do. But not all IFAs hold that permission, and the number who do is falling due to ever increasing restrictions laid down by their regulator (Financial Conduct Authority) plus the recent massive hikes in Professional Indemnity insurance has made it impossible for some to continue to offer this type of advice due to spiralling costs. Of those who are still active in this field (I am one) there are fewer yet who are actively familiar with all the in and outs of the various permutations of the NHS pension scheme, so may be unwilling to provide advice as it is such a niche area.

@User139

One of the main advantages of a pension is the tax benefits, which you don’t get with a stocks and shares ISA. Whilst you don’t pay income tax or capital gains tax on shares in an ISA, you can only invest your post tax earnings. In this case, you invest £100 in an ISA but in a pension, it is topped up to £125. You then further benefit as if the shares increase 5%, in an ISA you would gain £5 (5% x £100) but in a pension £6.25 (5% x £125). It doesn’t sound like a lot, but over time it really adds up.

If you do go for a pension, just check the charges, they can quickly erode any gains.

And you can take 25% as tax free lump sum, at the moment as early as 55.

This.

Same logic for why you should put spare £100 into your pension rather than mortgage.

This is definitely what I do.

Also given the current economic climate pensions may undergo changes making it less lucrative in the years to come. Sooner you invest the better.

@Sunseed thank you, that is very helpful. We just advice on the best way of boosting the NHS pension, because it’s actually really complicated and the cost really varies depending on how we do it.

Is there any way of knowing whether an IFA can offer this advice (ie a central list?).