One thing that the other replies don't consider is the difference in pensions contributions and benefits, so depends on your priorities. It's a tricky thing to compare though.
With option 1 you'll be paying £5085 a year towards your pension, but in return you'll be adding an annuity of £880 to your pension for when you retire. You look at the value of that on the open market and it's worth about £16000 off the top of my head. In addition NHS pensions rise in line with inflation +1.5% which you'd struggle to match anywhere else.
I presume the private employer will only pay 3% towards your pension, so in total for £2850 contribution, you'll get £4560 a year in your pension pot to draw down from - this if compared to the NHS pension example is about £11.5K less value. But you can't really compare DC and DB pensions like that as it's a bit of a simplification, but shows how good the NHS pension is.
Yes, the difference is pension could be worth a lot. It may be worth doing the research into DC schemes Vs NHS pension and look at your priorities. If you can afford slightly less money now it's likely to be worth it in the long run.
!thanks this is what I’m struggling with, though I’ve realised I’ve made a mistake and the NHS would be 6.5% instead of 9.8% in option 3. I’d drop another income bracket if I went down to 2 days a week.
You’re right that the new employer would only pay 3%. They did say that some staff who have moved from the NHS have opted out of the NEST pension and have kept their NHS one but I’m not sure how that would work if they have left.
If I had both jobs I would still be contributing to my NHS pension albeit at a lower rate. Would it be stupid to opt out of the new one and pay extra into my NHS one from my increased take home pay? Obviously it would mean missing out on the employer contribution from the new job but would it be worth more in the NHS pension?
Iirc you can't directly pay more into your NHS pension. It's a flat fee. The options are additional pension which is not as good value or AVCs with the NHS pension.
You also do need to discuss the negatives though not just the end figure. Death, retirement age, not having any money to give to kids, only 30% going to spouse etc
+1 Yeah that's very true. They both have their pros and cons so important to read fully into them. DC are better if they don't feel you're going to live long into retirement or would rather be on the safe side while DB is great if you feel you're going to live a long life. Ofc nobody can really know what the future holds. Similar to thinking about going for an annuity or not. I personally like a bit of both if possible.
The NHS pension takes an awful lot off as well if you take an early retirement as you've alluded to too.
It looks like there's about 7k in favour of the private provider.
However, other long-term financial considerations include:
* What are your prospects for pay rises, promotions and job security in each option?
* If you leave the NHS and return, what kind of pension scheme might that be? Is that likely to happen?
* Would you be paying 60% tax on the difference? (i.e. do you have children?), You'd still get more money from the private provider, but is it enough more?
!thanks A few of those are unknowns at the moment. I’m currently inclined towards option 3, which is still an overall pay increase but means I can keep my NHS pension. Also means if I hate it or it’s not what I expect, I have the the option to go back to my old role.
Either of options 2 or 3 would push me just over the higher rate tax threshold.
I don’t have children but it’s a possibility for the future
I would personally go for option 2 since the private provider is paying £10000 more than the NHS job.
If the private provider was only a few thousand more then I might go for the NHS but because there is a 10000 difference I would definitely go for private provider.
Obviously you also have to think about if there is a difference in travel time and travel costs between the options.
!thanks yeah the new job would be 100% working from home so would reduce my travel, though currently any travel that’s not to my usual base is reimbursed so the difference would likely be negligible
Hi /u/tea-and-teacakes, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/gifts-and-inheritance-tax/
- https://ukpersonal.finance/pensions/
- https://ukpersonal.finance/student-loans/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Remember OP you will have to splot your tax code between both jobs otherwise one of them will be takimg a straight 20% hit in tax.
So factor that into yoir considerations as well.
If I was you. I would do Option 3 just to have variety of work and not get bored. But I have the attention span of a goldfish
One thing that the other replies don't consider is the difference in pensions contributions and benefits, so depends on your priorities. It's a tricky thing to compare though. With option 1 you'll be paying £5085 a year towards your pension, but in return you'll be adding an annuity of £880 to your pension for when you retire. You look at the value of that on the open market and it's worth about £16000 off the top of my head. In addition NHS pensions rise in line with inflation +1.5% which you'd struggle to match anywhere else. I presume the private employer will only pay 3% towards your pension, so in total for £2850 contribution, you'll get £4560 a year in your pension pot to draw down from - this if compared to the NHS pension example is about £11.5K less value. But you can't really compare DC and DB pensions like that as it's a bit of a simplification, but shows how good the NHS pension is.
Yes, the difference is pension could be worth a lot. It may be worth doing the research into DC schemes Vs NHS pension and look at your priorities. If you can afford slightly less money now it's likely to be worth it in the long run.
!thanks that’s what I’m wondering, whether I’m being distracted by the higher salary
!thanks this is what I’m struggling with, though I’ve realised I’ve made a mistake and the NHS would be 6.5% instead of 9.8% in option 3. I’d drop another income bracket if I went down to 2 days a week. You’re right that the new employer would only pay 3%. They did say that some staff who have moved from the NHS have opted out of the NEST pension and have kept their NHS one but I’m not sure how that would work if they have left. If I had both jobs I would still be contributing to my NHS pension albeit at a lower rate. Would it be stupid to opt out of the new one and pay extra into my NHS one from my increased take home pay? Obviously it would mean missing out on the employer contribution from the new job but would it be worth more in the NHS pension?
Iirc you can't directly pay more into your NHS pension. It's a flat fee. The options are additional pension which is not as good value or AVCs with the NHS pension.
You also do need to discuss the negatives though not just the end figure. Death, retirement age, not having any money to give to kids, only 30% going to spouse etc
+1 Yeah that's very true. They both have their pros and cons so important to read fully into them. DC are better if they don't feel you're going to live long into retirement or would rather be on the safe side while DB is great if you feel you're going to live a long life. Ofc nobody can really know what the future holds. Similar to thinking about going for an annuity or not. I personally like a bit of both if possible. The NHS pension takes an awful lot off as well if you take an early retirement as you've alluded to too.
It looks like there's about 7k in favour of the private provider. However, other long-term financial considerations include: * What are your prospects for pay rises, promotions and job security in each option? * If you leave the NHS and return, what kind of pension scheme might that be? Is that likely to happen? * Would you be paying 60% tax on the difference? (i.e. do you have children?), You'd still get more money from the private provider, but is it enough more?
!thanks A few of those are unknowns at the moment. I’m currently inclined towards option 3, which is still an overall pay increase but means I can keep my NHS pension. Also means if I hate it or it’s not what I expect, I have the the option to go back to my old role. Either of options 2 or 3 would push me just over the higher rate tax threshold. I don’t have children but it’s a possibility for the future
I would personally go for option 2 since the private provider is paying £10000 more than the NHS job. If the private provider was only a few thousand more then I might go for the NHS but because there is a 10000 difference I would definitely go for private provider. Obviously you also have to think about if there is a difference in travel time and travel costs between the options.
!thanks yeah the new job would be 100% working from home so would reduce my travel, though currently any travel that’s not to my usual base is reimbursed so the difference would likely be negligible
So for me it's a no brainer I would go for option 2. Except if you want variety then you can go for option 3.
Hi /u/tea-and-teacakes, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/gifts-and-inheritance-tax/ - https://ukpersonal.finance/pensions/ - https://ukpersonal.finance/student-loans/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Remember OP you will have to splot your tax code between both jobs otherwise one of them will be takimg a straight 20% hit in tax. So factor that into yoir considerations as well. If I was you. I would do Option 3 just to have variety of work and not get bored. But I have the attention span of a goldfish