Anyone know anything about NHS pensions ?

[Windypants21]

I am on the brink of retiring. As I'm 1995 special class I can leave at 55 yrs. I'm over 56 so good to go. I have 30 years in the NHS which is more than enough honestly. My conumdrum is how much should I take lump sum vs pension. I'm not sure of how this plays out on a month to month basis. The max I can take of a monthly pension is around 15k per year. How much does this mean I will get each month? I know 12k is tax free but still have to pay national insurance but i have no clue how much that will be deducted if i didnt do any other work, although i know i will have to.

Have you used the information on this website?
NHS Business Services Authority

You do not pay national insurance on your pension, you may choose to pay voluntary contributions if you are not entitled to a full state pension.

You are taxed at 20% on annual pension over £12,570.

If your annual pension is £15k your take home pay would be £1;210 per month.

One thing I would consider is what savings rate will you get on your lump sum vs the annual cpi rise.

If you give up pension for lump sum, the commutation rate is 12/1. That means for every £1 of pension you give up, you get £12 of lump sum. That’s a pretty poor commutation rate for someone who is only 56. Basically, if you live longer than about 15 years you will end up getting more if you take the higher pension (15 years allows for the fact that the pension would be taxable whereas the lump sum is tax free). Hopefully you will live quite a lot longer than this, given that 15 years would take you to 71 and average life expectancy for a woman is around 82. This does depend on your state of health though.

However, that doesn’t factor in your personal circumstances. Do you need the lump sum e.g. to pay off mortgage or do home improvements etc.? Those things might be more important now than the thought of potentially having more money in future. Or as a pp said you could take the lump sum and invest it, but would you get the same return as the CPI increase you will get on the pension?

If you don’t need the lump sum now, and you’re in good health so would expect to be drawing your pension longer than around 15 years, you’re probably better off overall taking the higher pension. But if you need the lump sum or just want the security of having the lump sum in the bank so it’s accessible if you need it, then take a higher lump sum.

Thanks for all the feedback and site links. Very helpful. Makes alot more sense now.