Has anyone considered that I just massively **** up with the man maths? A couple did but you know it’s been an amusing read for the last little while so I thought I’d just let it run.
As has been said lots of times, the hidden cost on the NHS scheme is the unknown pension cost because the hit is entirely dependent on how long you live.
Say the gross is £8,800 per year per @Minstadave example:
NHS and other public sector staff accrue pensions at 1/54 of their career salary, paid annually. It’s also inflation linked so todays value is the same as tomorrows value in ‘real’ terms.
£8,800 X 3 years = £26,400 sacrificed.
£26,400 X (1/54) = £489 pension lost every year.
Say you start drawing at 60 when the scheme allows and you live until your 80, so 20 years. 20 x £489 = £9,780 lost over that period. So an extra £272/month of hidden cost for the period of the lease. If you add that to the £413 ‘net’, suddenly it doesn’t look so attractive.
The longer you live the most it costs, if you die at 61, well the pension hit is the least of your concerns. But if you lived for 20 years, you’d have saved a whole £52 a month doing it.
Some people are fine with that and that’s all good.
The issue is most people wouldn’t even realise until they check their pension statements in 6 years and it’s not growing as fast as expected.
Those people might have saved £X00/month on the for the period of the salary sacrifice but in reality, if the salary sacrifice didn’t exist, they wouldn’t have spent anything like the gross amount on a car and would probably spend something closer to the ‘net’ amount. The money ‘saved’ probably wasn’t saved/invested either, it was probably spent on Netflix, Sky TV, take away coffee while charging, Avocado on toast and <insert anything else which boomers suggest young people are wasting they money on here> in the meantime.
Say you do 4 of these on the bounce over 12 years. All of a sudden your pension is £2000/year smaller and it is now £40k you don’t have after you retire.
The above only really applies to those with defined benefit pensions, other people need not worry about it as much.
As has been said lots of times, the hidden cost on the NHS scheme is the unknown pension cost because the hit is entirely dependent on how long you live.
Say the gross is £8,800 per year per @Minstadave example:
NHS and other public sector staff accrue pensions at 1/54 of their career salary, paid annually. It’s also inflation linked so todays value is the same as tomorrows value in ‘real’ terms.
£8,800 X 3 years = £26,400 sacrificed.
£26,400 X (1/54) = £489 pension lost every year.
Say you start drawing at 60 when the scheme allows and you live until your 80, so 20 years. 20 x £489 = £9,780 lost over that period. So an extra £272/month of hidden cost for the period of the lease. If you add that to the £413 ‘net’, suddenly it doesn’t look so attractive.
The longer you live the most it costs, if you die at 61, well the pension hit is the least of your concerns. But if you lived for 20 years, you’d have saved a whole £52 a month doing it.
Some people are fine with that and that’s all good.
The issue is most people wouldn’t even realise until they check their pension statements in 6 years and it’s not growing as fast as expected.
Those people might have saved £X00/month on the for the period of the salary sacrifice but in reality, if the salary sacrifice didn’t exist, they wouldn’t have spent anything like the gross amount on a car and would probably spend something closer to the ‘net’ amount. The money ‘saved’ probably wasn’t saved/invested either, it was probably spent on Netflix, Sky TV, take away coffee while charging, Avocado on toast and <insert anything else which boomers suggest young people are wasting they money on here> in the meantime.
Say you do 4 of these on the bounce over 12 years. All of a sudden your pension is £2000/year smaller and it is now £40k you don’t have after you retire.
The above only really applies to those with defined benefit pensions, other people need not worry about it as much.
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Obviously I gave him some money regardless but I was taken back a bit by his genuine kindness
