Another Pensions Query

[andrewc]

Little sister works for a local NHS trust in a fairly low level position.  She's in their pension scheme.   She has some spare cash and her bank are trying to talk her into an additional pension.   

While this is probably a good idea, would she be better off seeing if she can make extra payments into the NHS scheme ?

[redshift]

I don't know the NHS scheme, but within my pension scheme Ican make AVCs - additional voluntary contributions.  The rules changed a few years ago, but here's the DirectGov page about it.

[Adam]

The bank's only trying to get her to do an additional pension so they can earn commission on it, so I'd never trust what a bank says.  She's not with Barclays is she?

If she's got any debt, such as credit cards or loans, then any spare cash should be used to pay that off first.  She can pay more pension in the NHS, either additional years (which are normally a good deal) or a money purchase fund.  More info here.  However, if she's on a low salary, simply for flexibility, she's probably better putting any spare cash into an ISA.

[Madcow]

get a union rep at work to explain pensions properly to your sister.She is almost certainly better off making AVC's into the NHS scheme.The bank should have advised her of that if they did a proper fact search as required by the FSA.Many of the pensions mis-selling scams related to people already in good index linked schemes.

[andrewc]

Thanks for that. I've forwarded it on.    Adam, did you mean a cash ISA or a Share ISA ? Think she's already got both.

I must look at doing something myself as well. I've got 24 years built up in the BT scheme, but extra is always good Think I have the option of buying extra years or  AVC's in a standalone fund.

[Polar Bear]

If you've already got good pension provision then look to alternatives.   Better to have a spread rather than have all your eggs in one inaccessible basket IMO.

It's always good to have cash more or less readily available.   You generally can't get at your pension whereas you can cash.    If your sister has a cash isa, is she using it to her full benefit?

[ScumOfTheRoad]

Definitely put AVCs into the NHS scheme (additional voluntary contributions).
Someone close to me did that in years gone by, and is now getting the rewards.

[fred the great]

On the basis that you can't trust any Government, she would be wiser to have a private pension or a cash alternative as suggested above.

If it's private  it should be safer in non Government hands

[hellymedic]

I have to disagree. The NHS Superannuation Scheme has an excellent reputation and pays very well. I have only known people regret taking money out of it. I would suggest putting money into this, so long as theres no liquidity problem.

[Polar Bear]

Can it meet obligations going forward without excessive taxpayer input?   If Eton Minor and Sweep get in, I would imagine at some point they'll be looking to throttle back public sector pensions in line with similar ongoing activity in the private sector.

[hellymedic]

I suspect throttling pensions from Britain's largest employer might bring the threat of major industrial action.
I don't think they can demur on previous promises. Maybe I am naive.

[fred the great]

I have to disagree. The NHS Superannuation Scheme has an excellent reputation and pays very well. I have only known people regret taking money out of it. I would suggest putting money into this, so long as theres no liquidity problem.

I was talking in the longer term. I always had confidence that my Government Pension would be safe but I was very wrong

Of course Tony Bliar promised to correct it at least ten years ago and what did he do?
Absolutely nothing

Hence my preference for private pensions

[rogerzilla]

I suspect throttling pensions from Britain's largest employer might bring the threat of major industrial action.
I don't think they can demur on previous promises. Maybe I am naive.

You're naive 

Private firms are closing FS schemes into which they pay 20% and replacing them with money purchase schemes into which they pay 5%.  The money purchase bit isn't so had - I can understand them wanting to avoid the risk - but the slashing of contributions is the killer.  Who can afford to lose another 15% of gross salary just to stand still?  OK, I can (it's a lot less after tax), but not everyone.

[frankly frankie]

I don't think they can demur on previous promises.

I think anyone heavily invested in a pension is walking on a cliff edge.  I speak as one who is drawing a decent FS pension myself.  It's great - but I don't feel at all secure about its ongoing future.

[Polar Bear]

I suspect throttling pensions from Britain's largest employer might bring the threat of major industrial action.
I don't think they can demur on previous promises. Maybe I am naive.

There would be nothing to stop them deciding to terminate the FS schemes at a set point, then moving to alternative schemes which are cheaper to fund, require greater input from the employees, and pay out far far less thereafter.   I also would not be surprised to see benefits scaled down to adjust to a retirement age of 65.    I'm sure such a move will not be popular but it is surely necessary.   The public sector pension issue is massive.   We all know it's a problem but it's like anything else:  We just want it not to affect us as individuals.

If the funds cannot meet future demand then what alternative is there?   Should we pay all the early retired now and remove any hope of retirement from anybody under 55 now?   I don't think so. 

Unfortunately the baby boomers have emptied the cupboard being rather overly-generous to themselves.

[andrewc]

It's a worry, BT's pension fund has been plundered for repeated "early release" payments. The company has comitted to plugging the hole, but it's going to take a while.

I've got a fair bit of cash in ISA's and no mortgage. With interest rates so low I'm wondering whether it's woth risking a shares ISA, but which one ?

[Asterix, the former Gaul.]

Some years ago I was advised to take out FTSE100 tracker ISA. Over that period it's never been worth a lot more than I paid for it and sometimes it has been worth much less.

I also have shares in my former employer.  These are about at break-even point if I take the dividends received into account. Without the divi they are worth a significant amount less than I paid.

No more equity ISAs or shares for me - I'm sticking to fixed rate stuff.

Unfortunately I also have to agree with frankly frankie being in a similar sort of boat.  Fortunately I have a reasonable savings cushion as well as a FS pension income.

[Adam]

Thanks for that. I've forwarded it on.    Adam, did you mean a cash ISA or a Share ISA ? Think she's already got both.

I must look at doing something myself as well. I've got 24 years built up in the BT scheme, but extra is always good Think I have the option of buying extra years or  AVC's in a standalone fund.

Either or both, depending upon the level of risk you want to take!

Buying added years, especially in the NHS scheme, does seem a very cheap option, compared to the true cost of buying such a pension on the open market.

[spen666]

The solution to all these pension queries is surely for
1. People to die on the day they retire
2. Compulsory summary execution for anyone not complying with 1 above


As i'm a generous person, I'd ensure there was no compulsory retirement age


Next problem please

[Kathy]

The solution to all these pension queries is surely for
1. People to die on the day they retire
2. Compulsory summary execution for anyone not complying with 1 above


As i'm a generous person, I'd ensure there was no compulsory retirement age


Next problem please

I don't see it being a vote winner. The other problem is that a lot of pensions have a five-year guarantee (if you die within five years of retirement, the *full* pension passes to the spouse), so people dying on the day of retirement could still be costly. I think a better plan would be to offer all new pensioners a free sky-diving or swimming-with-sharks holiday as a "happy fifth anniversary of retirement" present. 

[rogerzilla]

Just give them a giant box of B&H as a retirement present.

[andrewc]

Thats actually a pisser. I'm single with no kids. I've filled out a direction of wish form saying that my sister should get the dosh if I snuff it, but this is at the "discretion" of the trustees..:-(

[rogerzilla]

Nah, they always follow your wishes.  The vagueness is to avoid tax.

[MikeFromLFE]

I know it's a bit late in the day, but I'll stick my oar in here.
I've got 37 years  NHS service and can see the glimmer of retirement on the near horizon.
My son has worked for the newly privatised railway industry for the last 5 or so years.
Both have relevance to this discussion!

Helen is right the NHS scheme has an excellent reputation, and even the new-this-year-let's-screw- them-a -bit-more scheme is very generous, not as good as the old-lets-screw-the-taxpayer scheme that I'm in,but still good.

The old scheme is a traditoinal final salary scheme, the new one is a 'working life average earnings' scheme. The relative in question will need to take advice as to whether to stay with the old scheme or jump in to the new. (As a rough guide, the younger you are, the more attractive the new scheme is - this advice is worth what you just paid for it - as is everything that follows).
The NHS also has arragements for AVCs, with - I think - Clerical Medical or some such, it used to be with Equitable Life - guess where mine is! (clue - it's going down the sluice). In the long term the AVC might be a good bet (ie - it really is a gamble)  if you can keep up the payments and aren't freaked out by the statements in the early years!

As an NHS employee I would think you would be barmy to leave the scheme.
I would consider a long-term cash savings plan (your choice) as an alternative to the AVC

Now - my son - he had a choice of joining a 'hybrid' pension scheme, very similar to the old British Rail final salary scheme, or joining his company's money purchase scheme. If - and it's a huge if - the NHS pension were to change dramatically again in the coming years - this is likely to be the sort of choice that NHS worker might get.
This of course, assumes that we will have a recognisable NHS at all in a few years.....

[IanDG]

Got my 'you are a fully protected member........................current pension arrangements and normal pension age will stay the same' letter today - I can still go at 60