Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to ExFM,ErroneousBee,GSVsowhat,Shelford,Hypster, for Donating to support the site

Wife's NHS Pension

AWOL
Posts: 33
Joined: October 20th, 2020, 5:08 pm
Has thanked: 14 times
Been thanked: 6 times

Wife's NHS Pension

#354669

Postby AWOL » November 8th, 2020, 11:13 pm

Hi,

My wife is a lot younger than me and wants to pay more into her NHS Scotland pension. She asked HR and they told her to google Standard Life AVCs (which didn't exactly impress me). It took more digging than we had expected but we found the right site. However the charges on the funds make me wonder if I have stumbled into a time machine.. passives at 1.01% and active funds as expensive as 2.97% https://library.standardlife.com/gpen4.pdf

Is there a better option? She just wants to retire before I lose my marbles : :roll:

Cheers,
AWOL

Adamski
2 Lemon pips
Posts: 209
Joined: July 13th, 2020, 1:39 pm
Has thanked: 362 times
Been thanked: 88 times

Re: Wife's NHS Pension

#354718

Postby Adamski » November 9th, 2020, 10:45 am

You could look at a Vanguard Sipp and a lifestrategy fund as costs low and considered safe.

Gan020
2 Lemon pips
Posts: 204
Joined: March 3rd, 2019, 12:25 pm
Has thanked: 69 times
Been thanked: 118 times

Re: Wife's NHS Pension

#354721

Postby Gan020 » November 9th, 2020, 10:49 am

I tood a quick look at the investments product and on page 19 it suggests that all the funds with passive in the name are active, which meant I would then have to read the guidance notes to better understand.

At which point I gave up. As already pointed out if they are really passive you can do at a fraction of the cost yourself.

xxd09
2 Lemon pips
Posts: 168
Joined: November 19th, 2016, 2:44 pm
Been thanked: 92 times

Re: Wife's NHS Pension

#354724

Postby xxd09 » November 9th, 2020, 10:58 am

If you decide to take personal control of pensions-get learning
Your wife needs to learn with you as it will be her”baby” eventually
An investment based SIPP will perform better if you learn how to do it but
You lose fringe benefits of a NHS pension-widowers pension and NHS contributions to your wife’s pension to name only two
Take your time and learn-it’s a complex area but well worth the effort
Monevator.com a good site for info
xxd09

ursaminortaur
Lemon Half
Posts: 5408
Joined: November 4th, 2016, 3:26 pm
Has thanked: 22 times
Been thanked: 198 times

Re: Wife's NHS Pension

#354727

Postby ursaminortaur » November 9th, 2020, 11:00 am

AWOL wrote:Hi,

My wife is a lot younger than me and wants to pay more into her NHS Scotland pension. She asked HR and they told her to google Standard Life AVCs (which didn't exactly impress me). It took more digging than we had expected but we found the right site. However the charges on the funds make me wonder if I have stumbled into a time machine.. passives at 1.01% and active funds as expensive as 2.97% https://library.standardlife.com/gpen4.pdf

Is there a better option? She just wants to retire before I lose my marbles : :roll:

Cheers,
AWOL


Apart from an AVC there is another way to purchase additional pension in the NHS scheme

https://pensions.gov.scot/nhs/your-membership/your-contributions/increasing-your-pension

Additional Pension is an amount of extra annual pension that can be bought when you’re in employment and contributing to the scheme. To qualify, you also have to be below your normal pension age (which is either the normal pension age set by your scheme or your State Pension age) and you can’t be absent from work due to ill health*. Any additional pension purchased is payable on retirement in addition to the other benefits you’ve accrued in your scheme.

Additional Pension can be bought in multiples of £250 up to a maximum of £5000 for the NHS 1995 and 2008 sections or £6750 for the NHS 2015 scheme. You can pay for it either as a single lump sum or through additional monthly contributions over a period of between one and 20 years.


Note. I haven't done any calculations on this so can't really say whether it is good value or not.

With some schemes having an AVC allows you to take the whole tax free lump sum from the AVC rather than commuting it from the DB scheme (the factors used for such commutation, ie how much annual pension you give up for each additional pound of lump sum, are usually terrible hence that is a considerable benefit). However this only applies to some schemes and I'm not sure the NHS schemes allow this - but your employer should be able to confirm one way or another. If they don't then I'm not sure that there is much benefit having an AVC as compared to just contributing to a stand alone stakeholder or SIPP pension. Note since A-day in 2006 you have been able to contribute to multiple pensions so long as your total contributions remain within the annual and lifetime allowances.

xxd09
2 Lemon pips
Posts: 168
Joined: November 19th, 2016, 2:44 pm
Been thanked: 92 times

Re: Wife's NHS Pension

#354785

Postby xxd09 » November 9th, 2020, 1:41 pm

Personal-relevant?-My wife was a teacher in the same position as yours
The AVC recommended by the Teacher,s Pension was run by the Prudential
Very expensive and poor perfomer as all Insurance Companies are without exception
I bought all the Past Added Years I could and ran a SIPP for her with the money she had left (you of course can contribute as long as you don’t exceed her entitlements)
She did have another small job which entitled her to SIPP contributions
Anybody can run a Stakeholder SIPP even not working-and contribute a maximum of £2800 pa which the Government makes up to £3500(check these figures)
Mounts up over the years
xxd09

ursaminortaur
Lemon Half
Posts: 5408
Joined: November 4th, 2016, 3:26 pm
Has thanked: 22 times
Been thanked: 198 times

Re: Wife's NHS Pension

#354866

Postby ursaminortaur » November 9th, 2020, 4:02 pm

xxd09 wrote:Personal-relevant?-My wife was a teacher in the same position as yours
The AVC recommended by the Teacher,s Pension was run by the Prudential
Very expensive and poor perfomer as all Insurance Companies are without exception
I bought all the Past Added Years I could and ran a SIPP for her with the money she had left (you of course can contribute as long as you don’t exceed her entitlements)
She did have another small job which entitled her to SIPP contributions
Anybody can run a Stakeholder SIPP even not working-and contribute a maximum of £2800 pa which the Government makes up to £3500(check these figures)
Mounts up over the years
xxd09


If you have no relevant earnings you can contribute £2880 to which the government adds £720 making £3600.

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions

If you have no earnings or earn less than £3,600 a year, you can still pay into a pension scheme and qualify to have tax relief added to your contributions up to a certain amount.

The maximum you can pay is £2,880 a year. Tax relief is added to your contribution so if you pay £2,880, a total of £3,600 a year will be paid into your pension scheme, even if you earn less than this or have no income at all.

This applies if you pay into a personal or stakeholder pension yourself (so not through an employer’s scheme) and with some workplace pension schemes – but not all. The way some workplace pension schemes give tax relief mean that people earning less than the personal allowance (£12,500 in the 2020-21 tax year) won’t get tax relief.

swill453
Lemon Quarter
Posts: 4696
Joined: November 4th, 2016, 6:11 pm
Has thanked: 417 times
Been thanked: 1641 times

Re: Wife's NHS Pension

#354874

Postby swill453 » November 9th, 2020, 4:09 pm

ursaminortaur wrote:If you have no relevant earnings you can contribute £2880 to which the government adds £720 making £3600.

Though for many people the tax will only be deferred, and the government will take (most of*) it away again later.

* - 25% can be tax free, so a true gain of 20% of 25% of £3600 is made, i.e. £180. For a basic rate taxpayer.

Scott.

Chrysalis
Lemon Slice
Posts: 755
Joined: November 4th, 2016, 10:58 am
Has thanked: 243 times
Been thanked: 222 times

Re: Wife's NHS Pension

#354916

Postby Chrysalis » November 9th, 2020, 5:18 pm

As others have said, there are two ways for your wife to improve her pension provision.
Buying additional benefits within the NHS scheme (as outlined above) is relatively expensive (which does not mean poor value) and will increase her guaranteed income when she comes to take the pension.

The other way is to build up a defined contribution pension pot alongside her defined benefit (guaranteed) pension. This is more flexible, she will be able to access the pension 10 years before the normal NHS pension retirement age, however there is no guarantee of any particular income from the pot.
If you aren’t already familiar with this distinction I suggest you read further.
The AVCs linked to the scheme are a way of building up DC benefits, but unlikely to be the best way due to the relatively high costs (as you’ve found). The one advantage is that the contributions are deducted at source from pay. An alternative is for your wife to open a personal pension (or SIPP) with either one of the big pension companies or an online broker. The latter is likely to be cheaper and more flexible but standard pension company offerings can also be quite ok. She can make regular payments or lump sum contributions as she wishes.

The other thing she/you need to find out about is the Annual Allowance as this limits the amount of tax relief on contributions. It’s quite complex to work this out for a DB pension so do some reading and also request a pension input statement. Whether it’s something your wife needs to worry about depends on whether she plans to make big DC contributions, and also how much she is paid - if she’s a consultant or GP, or in a similarly remunerated role, I’d say definitely look into this.

ursaminortaur
Lemon Half
Posts: 5408
Joined: November 4th, 2016, 3:26 pm
Has thanked: 22 times
Been thanked: 198 times

Re: Wife's NHS Pension

#354930

Postby ursaminortaur » November 9th, 2020, 6:03 pm

xxd09 wrote:If you decide to take personal control of pensions-get learning
Your wife needs to learn with you as it will be her”baby” eventually
An investment based SIPP will perform better if you learn how to do it but
You lose fringe benefits of a NHS pension-widowers pension and NHS contributions to your wife’s pension to name only two
Take your time and learn-it’s a complex area but well worth the effort
Monevator.com a good site for info
xxd09


I don't think the OP is considering either stopping membership of the main NHS pension or transferring from the main NHS pension. Hence the fringe benefits you mention shouldn't be affected. An AVC is just a DC pension associated with the main NHS DB scheme it only gets contributions from the employee and doesn't get contributions from the employer ie NHS. The AVC will build up a pot just like a personal pension (stakeholder, SIPP etc) which so long as an expression of wishes is filled out and given to the scheme operator would be passed on death to the indicated beneficiaries free of IHT.

AWOL
Posts: 33
Joined: October 20th, 2020, 5:08 pm
Has thanked: 14 times
Been thanked: 6 times

Re: Wife's NHS Pension

#355005

Postby AWOL » November 9th, 2020, 8:13 pm

I found the AVC option for buying additional income today and it's very good value for money (quite the opposite of what she was advised at work). I wish I could buy myself index linked income so cheaply. She is going to purchase the maximum additional pension by monthly payment.

She is also going to get a Vanguard SIPP for slowly building up her early retirement sum to cover 60-68. Vanguard is low cost and easy to understand. I suspect they will have a simple drawdown option by the time she retires. My financial arrangements are complex and I want her to have arrangements that wont be taxing when I am gone (no pun intended).

Thank you all.

hiriskpaul
Lemon Quarter
Posts: 2355
Joined: November 4th, 2016, 1:04 pm
Has thanked: 129 times
Been thanked: 559 times

Re: Wife's NHS Pension

#355466

Postby hiriskpaul » November 11th, 2020, 10:26 am

NHS Additional Pension is good value. Much better than is available from the purchase of an annuity from a DC pension. Buying Additional Pension can be a bit of a bureaucratic nightmare though unfortunately. NHS Pensions lack basic competence and are difficult to deal with, especially for people who are not financial experts. My sister in law bought some Additional Pension last year and she is currently trying to get the tax relief on it. That does not appear to be straightforward either. She will likely buy more this year, but would like to see last year's fully sorted first.

One thing to be aware of is that the cost of Additional Pension rises on the contributors birthday.

xxd09
2 Lemon pips
Posts: 168
Joined: November 19th, 2016, 2:44 pm
Been thanked: 92 times

Re: Wife's NHS Pension

#355667

Postby xxd09 » November 11th, 2020, 7:52 pm

You are aware of the difference between buying Past Added Years which is improving her basic NHS pension and AVC,s which are standalone products -usually Insurance Company items -poor performers and expensive
xxd09

cavebat
2 Lemon pips
Posts: 193
Joined: November 4th, 2016, 12:43 am
Has thanked: 189 times
Been thanked: 442 times

Re: Wife's NHS Pension

#355709

Postby cavebat » November 12th, 2020, 12:30 am

AWOL wrote:My wife is a lot younger than me and wants to pay more into her NHS Scotland pension. She asked HR and they told her to google Standard Life AVCs (which didn't exactly impress me). It took more digging than we had expected but we found the right site. However the charges on the funds make me wonder if I have stumbled into a time machine.. passives at 1.01% and active funds as expensive as 2.97% https://library.standardlife.com/gpen4.pdf


You've had quite a few replies, but it strikes me that nobody has asked some pertinent questions. What's your age difference? Are you already retired? Bit morbid, but do your pensions provide for your wife on your death? Would her NHS pension provide for you as her widower? How many years does your wife already have in the NHS scheme.

I ask this as I took "early" retirement from the civil service last year, my husband is 12 years older than me.

AWOL
Posts: 33
Joined: October 20th, 2020, 5:08 pm
Has thanked: 14 times
Been thanked: 6 times

Re: Wife's NHS Pension

#355747

Postby AWOL » November 12th, 2020, 8:56 am

What's your age difference?
9 years
Are you already retired?
I am 50 (cannot access pensions until 50 but have other investments) and retirement was forced on me but it is allowing me to give my children more support so that's fine.

Bit morbid, but do your pensions provide for your wife on your death?
Only about £4k per annum plus a lump sum however I have about £0.77m of investments.

Would her NHS pension provide for you as her widower?

Something small like £3k.

How many years does your wife already have in the NHS scheme.

11 and a bit in final salary (1995) and some career average salary on top of that. Numbers are not currently to hand but enough for living and to allow a foreign holiday a year (maybe two) without taking my money into account but we are going to work on improving this.

hiriskpaul
Lemon Quarter
Posts: 2355
Joined: November 4th, 2016, 1:04 pm
Has thanked: 129 times
Been thanked: 559 times

Re: Wife's NHS Pension

#356601

Postby hiriskpaul » November 14th, 2020, 7:08 pm

As others have said, I would forget about the NHS AVCs. A simple SIPP from someone like Vanguard would have much lower charges (0.15% + fund charges).

I would not dismiss the NHS Additional Pension either even though it can be a headache to get it. She would be limited to buying £5,000 annual pension if she is a member of the 1995/2008 Scheme or £6,500 annual pension if in the 2015 Scheme. My sister in law is due to retire in only a couple of years and it seemed simpler to use a lump sum, but It is possible to buy Additional Pension via deductions from pay and that may work out a simpler.

To work out the cost of buying Additional Pension you can use an online calculator here: http://www.nhspensions.nhsbsa.nhs.uk/Pe ... index.aspx

That is for England and Wales though. I have no idea whether the costs are different in Scotland, but they have a downloadable calculator here: https://pensions.gov.scot/nhs/your-memb ... calculator

AWOL
Posts: 33
Joined: October 20th, 2020, 5:08 pm
Has thanked: 14 times
Been thanked: 6 times

Re: Wife's NHS Pension

#358658

Postby AWOL » November 21st, 2020, 8:34 am

We went for the additional pension option. If we feel the need to save more then I think I will point her towards vanguard.

xxd09
2 Lemon pips
Posts: 168
Joined: November 19th, 2016, 2:44 pm
Been thanked: 92 times

Re: Wife's NHS Pension

#358669

Postby xxd09 » November 21st, 2020, 9:38 am

Good decision
xxd09

bionichamster
Lemon Slice
Posts: 390
Joined: November 4th, 2016, 10:52 pm
Has thanked: 180 times
Been thanked: 54 times

Re: Wife's NHS Pension

#361274

Postby bionichamster » November 29th, 2020, 8:44 pm

AWOL wrote:We went for the additional pension option. If we feel the need to save more then I think I will point her towards vanguard.


Just a thought for others who are members of ‘unfunded’ public schemes in Scotland and are considering options for additional pension. Most of these schemes have an implicit value in Sterling, you pay your pounds in and expect to get a defined amount back in pounds when you retire.

But

With the very real spectre of Scottish independence rearing its head again, one might wish to consider the possible impact of an independent Scotland having to stop using the pound and how that might impact on what you actually receive as a pension, and also how the trajectory of any new Scottish currency might affect what that pension Is worth in future years.

For what it’s worth I don’t really know what the likely outcome is, but given That I expect to retire on a full civil service pension (thanks to buying a large number of ‘added years’ ) I have to say I’m not hopeful that a new Scottish currency would be good news for me or the 100’s of thousands of others holding these pensions, but a Sipp, dp or db pension based on real assets held outside of Scotland might fare much better if the ‘groat’ tanks as I feel it probably would.

Purely speculative problem, but perhaps not for much longer.

I’s all a massive unknown, but it is increasingly important in my thinking as the chance of independence rises and I will be seeking answers should another referendum be thrust upon us.

BH

AWOL
Posts: 33
Joined: October 20th, 2020, 5:08 pm
Has thanked: 14 times
Been thanked: 6 times

Re: Wife's NHS Pension

#361284

Postby AWOL » November 29th, 2020, 10:04 pm

bionichamster wrote:
AWOL wrote:We went for the additional pension option. If we feel the need to save more then I think I will point her towards vanguard.


I’s all a massive unknown, but it is increasingly important in my thinking as the chance of independence rises and I will be seeking answers should another referendum be thrust upon us.

BH


I doubt you will get any answers until after a referendum in a similar way to how politicians couldn't tell us what Brexit would specifically look like before they had sat down and negotiated a settlement... In fact they still cannot although all should soon become clear.

Regarding this specific problem I think there are too many ponderables and too much that is yet to be settled for it to be anything other than something to be stoic about. Who knows perhaps the English Lira will be no better. In reality I suspect in a similar way to the Punt the Scottish Pound could be tied to the GBP initially although this is another type of hell that no sane mind would wish to maintain in perpetuity. Still the Irish lived with it for long enough.

If Scotland becomes independent there would be the challenge of moving for a state dominated economy to a full free market economy that would likely be the major determinant of our economic well being. That and the challenge of the vast majority of Scotland's trade being with the rest of the UK (70% if I remember correctly) meaning that a UK of Lesser Britain and NI trade deal with free movement of goods and cross border services would also determine our economic health.

So much to consider and yet there's noone that I'd trust to give me an accurate prediction on any of these issues and I can see no sensible hedges other than overseas assets which in turn carry distinct risks.


Return to “Pensions - Practical Problems”

Who is online

Users browsing this forum: TUK020 and 3 guests