NHS lease scheme

Author
Discussion

Deep

Original Poster:

2,064 posts

242 months

Sunday 26th January 2020
quotequote all
There's been some discussion on the 'best lease deals' thread about the NHS scheme.

I thought it might be worthwhile having a separate thread for both the discussion of how it works and best deals.

I've never used it before and in particular don't understand the pension implications? Anybody care to explain please?

I'm on the higher end of the pay scale in the NHS and it might even be beneficial to reduce my pension pot as it will prevent me from being landed with a horrendous tax bill.

Thanks

Scrump

21,893 posts

157 months

Sunday 26th January 2020
quotequote all
As well as pension implications, there are benefit in kind tax implications.

My understanding is that HMRC will tax the driver on whatever the greatest is between:

a) the Income Tax due on the amount of salary sacrificed on the finance rental of the vehicle, or

b) the Benefit in Kind charge on the car, which is determined by the P11D and CO2 emission levels of the vehicle.


sawman

4,915 posts

229 months

Sunday 26th January 2020
quotequote all
Have you run any quotes? Looking at fleet solutions the electric cars which attract O% BIK seem worth while but the impact of BIK on other cars over the last few years means they are not that competitive compared to deals in a garage - more so if you are on a higher band

Fast Bug

11,598 posts

160 months

Sunday 26th January 2020
quotequote all
It's quite often cheaper to lease a car outside of these schemes, so double check prices before you sign up

numtumfutunch

4,705 posts

137 months

Sunday 26th January 2020
quotequote all
Fast Bug said:
It's quite often cheaper to lease a car outside of these schemes, so double check prices before you sign up
Yes, but the BIK on EVs makes them hard to resist

I3s for £200/month anyone taxed, insured and maintained? Or an etron for 300.....

What is less clear to non experts is the effects on your total pension and pension tax when the lease ends

Cheers

Terzo123

4,309 posts

207 months

Sunday 26th January 2020
quotequote all
My wife was in the scheme for years., starting with a VW Tiguan in 2008, Qashqai in 2011, then an A3 in 2014.

After the Audi in 2017 she left the scheme as the value of the car she was entitled to kept dropping. The Audis list price in 2014 was something like 20, 950 and at the time she could select from a list of cars along as the value was under 21k.

After 3 years with the Audi they had dropped this down to something like 17.5k severely limiting what we could go for. We ended up buying.

Prior to that, I'd always found the scheme pretty good. Insurance, tax and maintenance was included. I'm sure we paid about 200 quid a month for the Audi.

Downward

3,492 posts

102 months

Sunday 26th January 2020
quotequote all
numtumfutunch said:
Fast Bug said:
It's quite often cheaper to lease a car outside of these schemes, so double check prices before you sign up
Yes, but the BIK on EVs makes them hard to resist

I3s for £200/month anyone taxed, insured and maintained? Or an etron for 300.....

What is less clear to non experts is the effects on your total pension and pension tax when the lease ends

Cheers
As your now in the 2015 scheme the pension now goes on contributions into a pot.
Leasing the car will reduce your salary and thus contributions going into the pot.
The pot thus is now smaller and not growing as much so when you get your pension it will be less.

Our Trust Director of Finance has thus never entertained this leasing game due to the blasé attitude of the provider and the risk for employees cost wise.

Olas

911 posts

56 months

Sunday 26th January 2020
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Don’t lease, buy!


Fast Bug

11,598 posts

160 months

Sunday 26th January 2020
quotequote all
Whilst the BIK is good on the EV cars, it will change in the coming years as more and more people switch to them. So you need to keep this in mind.

I've been involved in setting a few of these schemes up and for non EV products, generally they're more expensive and that's before you take in to account pension contributions.

Downward

3,492 posts

102 months

Sunday 26th January 2020
quotequote all
numtumfutunch said:
Fast Bug said:
It's quite often cheaper to lease a car outside of these schemes, so double check prices before you sign up
Yes, but the BIK on EVs makes them hard to resist

I3s for £200/month anyone taxed, insured and maintained? Or an etron for 300.....

What is less clear to non experts is the effects on your total pension and pension tax when the lease ends

Cheers
It’s been a few years since I was involved in the discussions of introducing the scheme but when I had access to the site to have a look there were no way anyone was offering anywhere near these figures.

Denno B

962 posts

204 months

Sunday 26th January 2020
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Looking at ordering an Audi Etron all electric car on this scheme. An official quote came in @ £315 x 24 months included the home charger installed, insurance for up to 4 family members, servicing and maintenance included and the biggest saving of no fuel! Seems like a no brainer, as someone has already mentioned the petrol/ diesel equivalents are not as competitive although they all do include insurance etc too.

egor110

16,818 posts

202 months

Sunday 26th January 2020
quotequote all
I'm a postie and Royal mail run a similar scheme for not only cars but laptops phones etc.

A few people have been stung on tax as it's a benefit in kind .

garpat32

115 posts

81 months

Sunday 26th January 2020
quotequote all
There's different schemes though, not all trusts use fleetsolutions, so the information you receive may not be relevant.

There's quite a bit of info here https://www.nhsfleetsolutions.co.uk/faqs/

I previously leased a Golf GTE through them, and am currently waiting for the Ioniq in April .

Cheers

Edited by garpat32 on Sunday 26th January 09:50

ahm

148 posts

98 months

Sunday 26th January 2020
quotequote all
Thanks for setting up separate thread Deep.

As someone else above, my wife has got an e-tron quote of about £318p/m for 8k mpa. With it being 0% BIK, I don't think there's a tax issue, it's really the pension bit I'm getting my head around. Think I'm starting to understand (slightly!) the pot contribution going down, and final pension dropping based on the 1/54th of pensionable salary calculation etc.

It really goes beyond my man maths though, and I can't get past the "£318 p/m for an e-tron" including all the extras, seems brilliant!

numtumfutunch

4,705 posts

137 months

Sunday 26th January 2020
quotequote all
To clarify, the killer deals must include :

Salary sacrifice
Zero BIK

Thus EVs are the only things which make sense and previous lease schemes are not relevant

Cheers

garpat32

115 posts

81 months

Sunday 26th January 2020
quotequote all
Yes, I seen the E-tron and it sounded a good deal but I'm not higher tax payer so it works out a lot more unfortunately.

It's not for everyone, but some people just want an "all in one " lease where only thing you need to worry about is fuel.

Not every car they offer is a good deal, but when they have special offers on you will struggle to match them anywhere

ahm

148 posts

98 months

Sunday 26th January 2020
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For info, here's how the quote is broken down when you get it


Mustache

2 posts

50 months

Sunday 26th January 2020
quotequote all
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.

gangzoom

6,254 posts

214 months

Sunday 26th January 2020
quotequote all
ahm said:
It really goes beyond my man maths though, and I can't get past the "£318 p/m for an e-tron" including all the extras, seems brilliant!
You need to work out the impact on the pension cost over the life time of the retirement and add that to drop in net pay to see the true cost to the 'deal'.

The one benefit of working weekend/night/public holiday shifts most clinical NHS staff do just as part of the shift rota without asking for any additional payment is the pension benefits the NHS provides. Losing £40/month through salary sacrifice on parking or similar amount is nothing compared to £300+/month on a rental car.

garpat32

115 posts

81 months

Sunday 26th January 2020
quotequote all
It's all subjective though.

Another way to look at it, Drive a 60-70k car now and enjoy it, the whole idea of pensions is a gamble on the future