NHS lease scheme

[kieranblenk]

My mam is a community nurse and has had NHS lease cars since 2009. She now is on her fourth, a Polo R-Line which has been the most disappointing and is currently stuck at the dealer with a knackered wheel bearing but that's a different story entirely.

In the early days it worked really well and we had a Mini Cooper D initially in 2009, then a DS3 DSport HDI in 2012, then an A1 S-Line in 2015 and now the Polo which is a year old. It used to be dirt cheap (I think the DS3 was something ridiculous like £65 a month net deduction) but this isn't the case now. The prices have shot up and my mam had to go for a 1.0 TSI this time rather than the 1.6 diesels she always had prior, but stuck with the scheme just for easiness as the cars are fully maintained etc.

[Downward]

Mustache said:

Someone on the previous thread asked me to explain how an NHS lease reduces your pension, with full figures, so I'lll have a go.

The 2015 pension scheme, which anyone under around 57 years old is now on, is a career average based scheme. It is calculated by dividing your annual salary after each financial year by 54, and that amount goes into a 'pot'. You will have extra pots after every subsequent financial year. Each pot is revalued every year, at 1.5% above inflation, so if inflation was 2% in the last year, all the pots are revalued by 3.5%. Once you retire, all the pots are added up, and the total is paid to you annually.

As an example, someone earning 40K throughout their career of 10 years would gat the following pension (ignoring any future inflation):

Year 1: 40,000/54 = £740 compounded by 1.5% for 9 years = £846.11
Year 2: 40,000/54 = £750 compounded by 1.5% for 8 years = £833.60
Year 3: 40,000/54 = £750 compounded by 1.5% for 7 years = £821.29
Year 4: 40,000/54 = £750 compounded by 1.5% for 6 years = £809.15
Year 5: 40,000/54 = £750 compounded by 1.5% for 5 years = £797.19
Year 6: 40,000/54 = £750 compounded by 1.5% for 4 years = £785.41
Year 7: 40,000/54 = £750 compounded by 1.5% for 3 years = £773.80
Year 8: 40,000/54 = £750 compounded by 1.5% for 2 years = £762.37
Year 9: 40,000/54 = £750 compounded by 1.5% for 1 year = £751.10
Year 10: 40,000/54 = £750 compounded by 1.5% for 0 years = £740

Once you add the 10 pots up, it gives an annual retirement income of £7920.02



If someone takes out an NHS car lease of £300/month, that means their salary drops by £3600 to £36,400. So the pot that year will drop from £740 to £650, a £90 decrease, and will be decreased by the length of the lease e.g. 3 year lease = £90x3 = £180 less a year in NHS pension. If a person has 30 years left in work before retiring, that £180 would have been rebalanced every year by at lease 1.5%. That gives £240 less a year.

£240 doesn't sound that much, but that's £4800 on a 20 year retirement, and if you have multiple leases if can add up to much more than that.

It MAY be worth it for higher rate tax payers to take put an NHS lease, but I wouldn't do it as a 20% tax payer myself.

Yep I won’t bother now with the cycle scheme either because of how they changed the pensions.

[Denno B]

I suppose one potential issue is taking a two year deal with insurance included and then going back to a regular lease or pcp. Would the no claims bonus prior to the nhs scheme still be valid after not using own insurance for two years?

[covmutley]

I'm looking at an Etron for my wife.

Yes it will impact pension, but the cost is just ridiculously cheap for a 70k car!

I'm sure we are in a sweet spot right now. 0 bik and 0 road tax. That will change no doubt. I'm tempted to say grab a 2 year lease now, and then come back out after. It shouldnt make a big difference to the pension for just 2 years.

[jjwilde]

They had the Tesla 3 *Performance* for £324/month inc insurance. It's sold out for now but will apparently be coming back.

[Denno B]

covmutley said:

I'm looking at an Etron for my wife.

Yes it will impact pension, but the cost is just ridiculously cheap for a 70k car!

I'm sure we are in a sweet spot right now. 0 bik and 0 road tax. That will change no doubt. I'm tempted to say grab a 2 year lease now, and then come back out after. It shouldnt make a big difference to the pension for just 2 years.

I’d agree with that, good time to try it and can always go back to usual routes of personnel lease and pcp’s if need be.

[zoolando]

Denno B said:

I suppose one potential issue is taking a two year deal with insurance included and then going back to a regular lease or pcp. Would the no claims bonus prior to the nhs scheme still be valid after not using own insurance for two years?

I had a vehicle supplied by NHS Fleet Solutions for 3 years. At the end of the 3 years, I returned the car and their insurance broker provided me with a document which was recognised by Direct Line as 3 years no claims on a company car. I am not sure whether you can keep your no claims built up before taking the lease.

[gangzoom]

covmutley said:

It shouldnt make a big difference to the pension for just 2 years.

I think you are right on the 2 year bit, shouldn't have an impact on pension, just don't end up doing it for years on end.

[dave_s13]

Interesting stuff.

I've recently ordered a Peugeot e 2008 but not signed the docs yet. £241/month

But I'm now thinking I'm going to cancel and instead get a loan to fund a used leaf for about 8-9k mark. They don't seem to be dropping in value so it makes much more sense financially.

Not as exciting as a new e-tron mind.

[Fast Bug]

gangzoom said:

covmutley said:

It shouldnt make a big difference to the pension for just 2 years.

I think you are right on the 2 year bit, shouldn't have an impact on pension, just don't end up doing it for years on end.

Most people end up staying on these schemes out of habit though

[GT72]

Evezy offer a Tesla Model 3 performance lease on the same basis as the NHS scheme - fully insured and maintained including tyres but on a personal lease basis rather than salary sacrifice. Their cost is £1,000 pcm.

Over the 2 year term the NHS lease is £15,600 cheaper.

I would rather make a saving of £15k today over a “possible” cost of £5k in 50 years time.

There are definitely pension issues and certainly 99% of the deals on the NHS scheme don’t look that attractive but the E-Tron and Tesla deals are ridiculously cheap. I was one of the lucky ones driving a Golf R for £163pcm - sometimes there are just great deals to be had, miss them at your peril.

[Downward]

Fast Bug said:

gangzoom said:

covmutley said:

It shouldnt make a big difference to the pension for just 2 years.

I think you are right on the 2 year bit, shouldn't have an impact on pension, just don't end up doing it for years on end.

Most people end up staying on these schemes out of habit though

Plus it’s open to all employees, Not all can afford a £300 a month car but through this leasing they have no credit checks and can just get an unaffordable new car.

[Downward]

GT72 said:

Evezy offer a Tesla Model 3 performance lease on the same basis as the NHS scheme - fully insured and maintained including tyres but on a personal lease basis rather than salary sacrifice. Their cost is £1,000 pcm.

Over the 2 year term the NHS lease is £15,600 cheaper.

I would rather make a saving of £15k today over a “possible” cost of £5k in 50 years time.

There are definitely pension issues and certainly 99% of the deals on the NHS scheme don’t look that attractive but the E-Tron and Tesla deals are ridiculously cheap. I was one of the lucky ones driving a Golf R for £163pcm - sometimes there are just great deals to be had, miss them at your peril.

Yeah this is a no brainier especially if your looking to lease or finance one of these types of cars anyway.

[covmutley]

Downward said:

Plus it’s open to all employees, Not all can afford a £300 a month car but through this leasing they have no credit checks and can just get an unaffordable new car.

Yes. Although with this deal, it could be 'affordable' for lots. Any half decent car is going to depreciate £100 a month. Those doing average mileage will also save probably the same again in fuel costs. After saving a bit more on no car tax, no insurance, no repairs, no servicing costs, no tyre costs, its compelling.

Unfortunately my mrs is not keen. She cant look past the monthly figure and refuses to believe it can be no more than running her xc60. Apparently she only spends out on servicing and tyres 'occasionally' so I shouldn't be including these as a monthly cost in my sums. Ffs.

[gangzoom]

GT72 said:

I would rather make a saving of £15k today over a “possible” cost of £5k in 50 years time.

But its not £5K in 50 years.

Tusker is our trust car scheme provider, a P Model 3 is £1000/month gross on their scheme - about £500/month next pay reduction.

£1000/month reduction in your pension translates to £435/month less per annum you are alive taking a pension, over a 3 year rental term that adds up to £1300/year reduction. If you live for 15 years thats £19,500 lost pension pay out. This is without taking into account above inflation guaranteed annual interest rate on the pension pay out, even assuming 3% annual interest, compounded over 15 years that will become a rather large figure.

Now add in the out of pocket net pay deduction you are paying right now to that sum and these 'amazing' NHS lease deals aren't really all that amazing.

By all mean 'live for today' but just understand the true cost of the product given it directly affects one of the most valuable financial aspects of been a NHS employee.

Edited by gangzoom on Sunday 26th January 20:39

[GT72]

gangzoom said:

GT72 said:

I would rather make a saving of £15k today over a “possible” cost of £5k in 50 years time.

But its not £5K in 50 years.

Tusker is our trust car scheme provider, a P Model 3 is £1000/month gross on their scheme - about £500/month next pay reduction.

£1000/month reduction in your pension translates to £435/month less per annum you are alive taking a pension, over a 3 year rental term that adds up to £1300/year reduction. If you live for 15 years thats £19,500 lost pension pay out. This is without taking into account above inflation guaranteed annual interest rate on the pension pay out, even assuming 3% annual interest, compounded over 15 years that will become a rather large figure.

Now add in the out of pocket net pay deduction you are paying right now to that sum and these 'amazing' NHS lease deals aren't really all that amazing.

Mustache’s explanation above make far more sense that yours. Based on your calcs my wife could work for 10 years and have a big enough pension pot to retire very comfortably.

Please can you explain why Mustache’s calculations are wrong.

[Chris32345]

Mustache said:

Someone on the previous thread asked me to explain how an NHS lease reduces your pension, with full figures, so I'lll have a go.

The 2015 pension scheme, which anyone under around 57 years old is now on, is a career average based scheme. It is calculated by dividing your annual salary after each financial year by 54, and that amount goes into a 'pot'. You will have extra pots after every subsequent financial year. Each pot is revalued every year, at 1.5% above inflation, so if inflation was 2% in the last year, all the pots are revalued by 3.5%. Once you retire, all the pots are added up, and the total is paid to you annually.

As an example, someone earning 40K throughout their career of 10 years would gat the following pension (ignoring any future inflation):

Year 1: 40,000/54 = £740 compounded by 1.5% for 9 years = £846.11
Year 2: 40,000/54 = £750 compounded by 1.5% for 8 years = £833.60
Year 3: 40,000/54 = £750 compounded by 1.5% for 7 years = £821.29
Year 4: 40,000/54 = £750 compounded by 1.5% for 6 years = £809.15
Year 5: 40,000/54 = £750 compounded by 1.5% for 5 years = £797.19
Year 6: 40,000/54 = £750 compounded by 1.5% for 4 years = £785.41
Year 7: 40,000/54 = £750 compounded by 1.5% for 3 years = £773.80
Year 8: 40,000/54 = £750 compounded by 1.5% for 2 years = £762.37
Year 9: 40,000/54 = £750 compounded by 1.5% for 1 year = £751.10
Year 10: 40,000/54 = £750 compounded by 1.5% for 0 years = £740

Once you add the 10 pots up, it gives an annual retirement income of £7920.02



If someone takes out an NHS car lease of £300/month, that means their salary drops by £3600 to £36,400. So the pot that year will drop from £740 to £650, a £90 decrease, and will be decreased by the length of the lease e.g. 3 year lease = £90x3 = £180 less a year in NHS pension. If a person has 30 years left in work before retiring, that £180 would have been rebalanced every year by at lease 1.5%. That gives £240 less a year.

£240 doesn't sound that much, but that's £4800 on a 20 year retirement, and if you have multiple leases if can add up to much more than that.

It MAY be worth it for higher rate tax payers to take put an NHS lease, but I wouldn't do it as a 20% tax payer myself.

And people complain NHS didn't give good pensions

[Downward]

Chris32345 said:

Mustache said:

Someone on the previous thread asked me to explain how an NHS lease reduces your pension, with full figures, so I'lll have a go.

The 2015 pension scheme, which anyone under around 57 years old is now on, is a career average based scheme. It is calculated by dividing your annual salary after each financial year by 54, and that amount goes into a 'pot'. You will have extra pots after every subsequent financial year. Each pot is revalued every year, at 1.5% above inflation, so if inflation was 2% in the last year, all the pots are revalued by 3.5%. Once you retire, all the pots are added up, and the total is paid to you annually.

As an example, someone earning 40K throughout their career of 10 years would gat the following pension (ignoring any future inflation):

Year 1: 40,000/54 = £740 compounded by 1.5% for 9 years = £846.11
Year 2: 40,000/54 = £750 compounded by 1.5% for 8 years = £833.60
Year 3: 40,000/54 = £750 compounded by 1.5% for 7 years = £821.29
Year 4: 40,000/54 = £750 compounded by 1.5% for 6 years = £809.15
Year 5: 40,000/54 = £750 compounded by 1.5% for 5 years = £797.19
Year 6: 40,000/54 = £750 compounded by 1.5% for 4 years = £785.41
Year 7: 40,000/54 = £750 compounded by 1.5% for 3 years = £773.80
Year 8: 40,000/54 = £750 compounded by 1.5% for 2 years = £762.37
Year 9: 40,000/54 = £750 compounded by 1.5% for 1 year = £751.10
Year 10: 40,000/54 = £750 compounded by 1.5% for 0 years = £740

Once you add the 10 pots up, it gives an annual retirement income of £7920.02



If someone takes out an NHS car lease of £300/month, that means their salary drops by £3600 to £36,400. So the pot that year will drop from £740 to £650, a £90 decrease, and will be decreased by the length of the lease e.g. 3 year lease = £90x3 = £180 less a year in NHS pension. If a person has 30 years left in work before retiring, that £180 would have been rebalanced every year by at lease 1.5%. That gives £240 less a year.

£240 doesn't sound that much, but that's £4800 on a 20 year retirement, and if you have multiple leases if can add up to much more than that.

It MAY be worth it for higher rate tax payers to take put an NHS lease, but I wouldn't do it as a 20% tax payer myself.

And people complain NHS didn't give good pensions

Yeah that’s wrong,
The pot is £7920 total. This would be your pension pot so however much you get per annum.

[Downward]

gangzoom said:

GT72 said:

I would rather make a saving of £15k today over a “possible” cost of £5k in 50 years time.

But its not £5K in 50 years.

Tusker is our trust car scheme provider, a P Model 3 is £1000/month gross on their scheme - about £500/month next pay reduction.

£1000/month reduction in your pension translates to £435/month less per annum you are alive taking a pension, over a 3 year rental term that adds up to £1300/year reduction. If you live for 15 years thats £19,500 lost pension pay out. This is without taking into account above inflation guaranteed annual interest rate on the pension pay out, even assuming 3% annual interest, compounded over 15 years that will become a rather large figure.

Now add in the out of pocket net pay deduction you are paying right now to that sum and these 'amazing' NHS lease deals aren't really all that amazing.

By all mean 'live for today' but just understand the true cost of the product given it directly affects one of the most valuable financial aspects of been a NHS employee.

Edited by gangzoom on Sunday 26th January 20:39

I’ve seen the Tusker quotes and it is big money

[gangzoom]

GT72 said:

Mustache’s explanation above make far more sense that yours. Based on your calcs my wife could work for 10 years and have a big enough pension pot to retire very comfortably.

Please can you explain why Mustache’s calculations are wrong.

His numbers was on a £300/month reduction, a P Model 3 which you were comparing has a gross reduction of £1000/month on Tusker website, giving a net out of pocket cost today of £500/month ish.

Depending on your wife's salary she could well retire with a good pension, compared to private pensions the NHS pay out is massive, for no risk. However if you take the pension early you will clearly be penalised.

All NHS trusts I have worked at really push salary sacrifice, its always on the home page of the trust intranet, booklets sent with payroll. The reason salary sacrifice is pushed so much is because it saves the trusts money long term.

https://www.legalandmedical.co.uk/is-the-nhs-pensi...

Edited by gangzoom on Monday 27th January 03:59