Paying extra in to NHS pension

[ProseccoOnTap]

I'd like to pay extra in to my pension, to help reduce taxation & also because I worked very part-time (0.5WTE) when DC were younger. My current contract is 0.9 WTE so I am still part time at the moment.

I was in the old 1995 scheme where retirement is age 60 & now in career average earnings where it is 67. I will benefit from the McCloud judgement.

Am I right in thinking that I can't pay anything now in to the old scheme? And if I pay extra now it will go in to the new scheme, which I can't access until I am 67?

I really want to go at 60.

Or should I consider a SIPP?

Everything you pay goes into the 2015 scheme now. The 1995 scheme is locked.

I really recommend this group on Facebook. They are a very knowledgeable bunch

www.facebook.com/groups/933532547820523/?ref=share

Thanks - I will take a look at that group.

Just don't think I'll be able to manage in the NHS until I am 67. Need to get a plan in place!

Bear in mind as well the new scheme is linked to state pension age. It might be 67 now, but I expect it to go up again.

So while it's tax efficient to pay extra into the pension, there is less control over when it's payable.

You can still take your 1995 pension at 60. In fact if you don't take it you are losing money. You could take it and reduce your hours. Our practice nurse did this she continued to pay into the 2015 scheme.

To pay in extra you could look at additional voluntary contributions (AVCs) if this still exists or set up a private pension.

I retired last year at 60 but I was in the 1995 scheme until 2022 ( still awaiting recalculation of pension after McCloud review) I just took the 2015 scheme early as it didn't affect the pension too much and hopefully even less once recalculated.

Thanks@Musicaltheatremum - I am hoping to do the retire & return scheme if it's still around in 6.5 years!! It seems to be almost too good to be true & I wonder if they will stop it before then.

I thought you had the choice of 1995 v 2015 at retirement- but the former is usually better?

I clearly have lots to learn!!!

Join the Facebook group, they are very helpful and knowledgeable.
If you are a member of the 1995 scheme you can take that at 60 via Retire and Return and continue to pay into the 2015 scheme. I believe McCloud gives you the option now to move all contributions up to March 2022 back to the 1995 scheme.
If you want to reduce tax you could pay into a linked AVC scheme? I believe Standard Life and Prudential run an AVC linked to the NHS.

That is helpful, thanks @HuaShan

The Facebook page is on hold today but I'll join when it reopens.

I was local government, retired at 57 and had been paying AVCs since 20 or so on and off, not huge amounts. In my final year I put in 50% of my salary and took £100k lump sum tax free (this I guess might change under labour). AVCs were through Prudential.

Interested how you know that mccloud judgement will impact you. I've been told it could be as late as next August before I find out.

OP,Does your trust offer retire and return, DW retired last year age 60, though could have gone before as special class, took her pension from the 95 scheme then returned to work after one day off on reduced hours( her choice could have stopped full time) and now pays into the new pension scheme, like op was part time for many years. Certainly wouldn’t move your 95 pension over to the new one

Saving into a SIPP gives you lots of flexibility. You can take it at 60 if you want and spend it all bridging the gap between when you get your 1995 pension and your other pensions, or leave it there for longer and just draw it down when you need it. A SIPP is easy to set up and manage - you don’t need to be an expert.

Thanks for all the comments.

I don't think I'll have huge amounts to pay in -at most £200/m.

It's mainly to bridge the gap between being part-time & also so I pay a bit less tax (we pay more in Scotland).

@ProseccoOnTap I’m CS but the schemes work quite similarly and both are affected by McCloud.

You need the following information:

• state pension: do a forecast to make sure you get the full state pension.https://www.gov.uk/check-state-pension
• 1995 Scheme - you should get two annual statements one showing your predicted benefits at 60 with your maximum service in this scheme and one showing with your service ending when the 2015 scheme was introduced.
• 2015 scheme - the annual statements will also show you predicted pension in this scheme at 67.

The key is to not just think about £ and lump sum at 60 and 67 but the total pension you will get until 80+. Is it better to take your 2015 scheme actuarily reduced at 62? yes it will be less money, but would you rather have say £10k for 18 years (80) or work to 67 and have say £14k for 13 years (80). Bear in mind the pensions are index linked so go up each year. Note: my figures are made up.

I believe the 2015 scheme allows you to pay to get your pension in full at 65 (but not earlier). It also appears to have an additional pension option. I would check these options out on the pensions website and as pp said ask for advice.

Taking your 1995 pension at 60 and working part time helps ease you into retirement and gives you the option of taking the 2015 pension at 62/63. Knowing at 67 you will then get state pension too.

You need a spreadsheet to work out the projections depending on when you would like to retire. Work out your potential expenditure including one off annual costs such as insurance, presents. This will give you an idea what income you need.

Finally, Remember you do not pay NI or pension contributions on your pension which means you keep more of your gross pension compared to your gross pay. A gross to net pay calculator can help see the difference.

You could consider an ERRBO as part of the 2015 scheme. Pay extra to claim your pension at 65 as opposed to 67 without the usual deduction for taking it early.

I'm 62 and I'm massively struggling.