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Advice needed on 'buying' missing pension years

My wife has a final-salary NHS pension of over thirty years, but has been seeking to 'fill in' a few missing years (when she had to switch to a private pension) by buying extra years ahead of her retirement. She was advised to do this by several people (though none, as far as I'm aware, were professional pension advisors) and has currently bought back approximately three years at a cost of around £250 per month.

However, after a recent conversation with someone working in local government (also with a final-salary pension), we have begun to question the wisdom of this, given that her employers don't contribute to these extra years as they do with her normal pension contributions.

Can anyone advise us on this? Is it worth buying back missing years or could the £250 a month be better invested elsewhere? Neither of us are particularly clued up when it comes to pensions, so any impartial advice would be gratefully received...

Nigel

Reply to
Nige
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Not without knowing her age, salary, planned retirement age, proportion of salary paid per year of contribution, acceptable level of investment risk, and the number of years for which she will pay the extra £3,000 a year.

I'm not clear whether the £250 is per month of equivalent service, in which case the duration of the payment doesn't matter, or out of each month's salary.

£3,000 at retirement, at 60, will buy something of the order of £100 per year in pension. Assuming a 60th final salary scheme, she is close to retirement age, and that you mean £250 per equivalent year of service, I would suggest that if her salary is significantly more than £10,000 (allows for the very rough figures) a year, it would be good to take the

NHS offer. If it is not, it might be worth looking at actual annuity rates.

Please verify all facts as this is no more valid financial advice than you have received from your friends, who will know more of the facts.

PS Is the NHS pension still fully index linked? I think most private annuity have a cap on the inflation rate that will be supported.

Reply to
David Woolley

How long until she does retire, how much is she currently paying per month for her pension, how much does she earn and what are the terms of her final salary pension (1/60th, 1/40th per year). How long does she expect to survive retirement for - is she a massively overweight heavy smoker, or someone in excellent health? Then you can quickly do the sums to work out if it`s a good deal or not.

Reply to
Simon Finnigan

As some other replies have stated, we need some more numbers, but generally speaking, the NHS pension is much better than what you would get elsewhere.

Reply to
Jonathan Bryce

Don't forget, though, that this is not a straight either-or comparison between using some money (be it from savings or diverting it from current earnings) to buy added years in the NHS pension, and investing the same money in some other pension.

There are loads of other options, such as spening it now, or just keeping it in savings (or adding it thereto).

Questions to ask oneself include:

How adequate is the existing unenhanced pension? How much more valuable is it to boost it by buying extra years? Might it be more valuable, once drawing a pension, to have more capital than more income?

Reply to
Ronald Raygun

I once knew a teacher who had a similar opportunity to buy extra years in a final salary pension scheme. i calculated that the deal she was being offered was by far better than anythign you could hope to get commercially. Ony a taxpayer funded scheme would offer such a deal :- (

R
Reply to
RobertL

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