UK pensions

[Mike Tyson]

Doctors have a pretty large annual fee to pay on their contributions too. Their pension is not what some think it is.

Everyone should get a state pension.

Can you elaborate on this? They save tax but then pay a charge?

[imtommygunn]

I am not 100% sure on the details of this but they pay a lump sum every year on their pension.I think it is possibly because their pension contributions cumulatively exceed the tax threshold pension contributions they are also taxed. They feel it is a number that is magically pulled out of thin air too and it is hugely different year on year.

I am a bit grey on some details tbh but I have a few close friends who are doctors and they are regularly lamenting this.

[seafoid]

Private pensions are allowed a tax free lump sum but everything else is taxed. Tax relief on contributions encourages people to save.

[imtommygunn]

There's only so much, which has just been extended and is a lot mind you, which is tax free. (60k or something)

[Mario]

You pay a charge if you contribute more than £40k to a defined contribution pension scheme or for doctors who have DB aka final salary schemes, they pay a charge if the value of their pension increases by more than £40k in one year. That limit has been upped to £60k following the last budget.

[trailer]

You can now put £60k per year into your private pension. (Used to be £40K) The cap was just over a £1m. So once you'd £1m in your pension was said to be full. That has now been removed. There's no upper limit. You can still take 25% out tax free at 57 years.

[Mike Tyson]

You pay a charge if you contribute more than £40k to a defined contribution pension scheme or for doctors who have DB aka final salary schemes, they pay a charge if the value of their pension increases by more than £40k in one year. That limit has been upped to £60k following the last budget.

If this is the charge tommygunn is referring to, then he is correct - their pension is not what some think, it is exceedingly more. Hard to have sympathy with anyone who contributes more to their pension than the average worker receives in gross salary.

Poor doctors have to contribute about 9% but neglect to mention the employer (tax payer) is chipping in 20-30% on top of that.

They don't get that 20-30% though. It goes into a communal pot to pay everyone who works for HSCNI.  They get 1/54(?) of each years salary every year of retirement.

They would appear to get more. A doctor with 30 years service on pensionable final salary of 50k (not unreasonable, maybe conservative estimate) would receive yearly pension of c.£30k - 60% of their salary? Be very hard pushed to get anything as good anywhere else for 9% contributions from your wage.

Average accrual rates for DB schemes are 1/60 or 1/80, so getting a boost here too.

[yellowcard]

I'd echo that. I did six years in London. With an investment of 1500 now I'll get about 107 sterling a week compliments of the Crown. I'm happy with that return

How so little?  It's telling me I have to pay £800 odd per year - not sure the sums add up at that rate.  What is the minimum pension, based on achieving the bare 10 years?

There are two categories, one pays around £300 the the other £900. If you were working and then left the UK you get to pay the lower amount, which is a complete no brainer. If you have to pay the £900 it is a good deal, if you live long, but not quite brilliant, as many Irish people with the cash in hand will end up paying 40% tax on this.

I have the same issue: 6 years of incomplete years, but each of the years would cost at least £720+. Would it still be worth paying that? It's quite a lump sum to pay out but I would if I thought it would be worth it.

Each extra contribution year gets you an extra £260 of pension retirement income per annum. So you would need to live over 3 years past the retirement age for it to become beneficial (if it costs you £720 per incomplete year). But its a hefty lump sum to be paying out for something you may benefit from in the future and if you need the money now then its not going to be a top priority. The rules around pension are always subject to budgetary changes though and who knows what may happen with them in the future in terms of age eligibility and the possibility that they may become means tested. I certainly wouldn't be putting down a big lump of money to pay for gaps unless I knew it was very likely to be of benefit.   

[RedHand88]

Poor doctors have to contribute about 9% but neglect to mention the employer (tax payer) is chipping in 20-30% on top of that.

They don't get that 20-30% though. It goes into a communal pot to pay everyone who works for HSCNI.  They get 1/54(?) of each years salary every year of retirement.

Should someone with a public job pension get a state pension?

Yes. I'll be getting a public sector pension and 2 state pensions (2 jurisdictions).
Might start a private one too later on when things have settled.

[armaghniac]

Each extra contribution year gets you an extra £260 of pension retirement income per annum. So you would need to live over 3 years past the retirement age for it to become beneficial (if it costs you £720 per incomplete year). But its a hefty lump sum to be paying out for something you may benefit from in the future and if you need the money now then its not going to be a top priority. The rules around pension are always subject to budgetary changes though and who knows what may happen with them in the future in terms of age eligibility and the possibility that they may become means tested. I certainly wouldn't be putting down a big lump of money to pay for gaps unless I knew it was very likely to be of benefit.   

Of course the £260 is likely to attract tax for many contributors and some people have to pay up to £900, so you may need to live longer. But then life expectancy is 80 odd and if you are dead then you won't miss the money, but if you live long then you may need it. It does have the advantage of being index linked, presently with a triple lock that no private fund would give you. The age eligibility means that this suits people close to the retirement age as the risk is less. The means testing would be a major issue, to be sure. But given that rich people pay back quite a bit of it in tax they will likely leave it alone, given that people paid into it.