NHS Pension 2015 Scheme

Derekcrg8
Derekcrg8 Posts: 2 Newbie
in Pensions, annuities & retirement planning
Hi all,

Apologies in advance if this seems like a silly question. I am a band 6 physiotherapist within the NHS, recently moved from the private sector. I have joined the NHS pension 2015 scheme, however I am somewhat baffled as to how it works. I understand that my employer pays in 14.3% of my salary, and as a member of the scheme I will earn 1/54th (1.85%) of my annual salary, with this revalued every year at a rate of Consumer Price Index (CPI) inflation plus 1.5%. However what I don't understand is I contribute 9.3% of my salary each month, which over a year equates to more than 1/54th of my annual salary. What happens to this contribution pot if I only earn 1/54th of my salary? No doubt there is an easy explanation to this so if anyone could provide one I would greatly appreciate it.
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Comments

  • greenglide
    greenglide Posts: 3,301 Forumite
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    edited 12 November 2016 at 3:17PM
    You will receive 1/54 of your salary for the rest of your life on retirement, not just for a single year.

    And this is index linked. Very good deal!

    And there is no "pot" for a Defined Benefit scheme like this.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    What will receive as a lump sum on retirement?
  • Silvertabby
    Silvertabby Posts: 9,018 Forumite
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    What will receive as a lump sum on retirement?

    There's no automatic lump sum. Assuming that the rules don't change before you retire, you will be able to give up some of your pension in return for a one off tax free lump sum of no more than 25% of your notional pension fund. This is called 'commutation' and I believe that the current NHS rate is £12 of lump sum for £1 of pension.
  • justme111
    justme111 Posts: 3,508 Forumite
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    I believe automatic lump sum is abolished. Suppose it is still not a bad deal. However keeping in mind retirement age (is it 67 or 68 now) which is bound to be even higher in the future and average life expectancy it is not for that long that one is going to be benefitting from accrued 1/54th of salary ..
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    justme111 wrote: »
    I believe automatic lump sum is abolished. Suppose it is still not a bad deal. However keeping in mind retirement age (is it 67 or 68 now) which is bound to be even higher in the future and average life expectancy it is not for that long that one is going to be benefitting from accrued 1/54th of salary ..

    It's not a bad deal to the extent that you won't get anything like this offered anywhere in the private sector.

    The accrued pension, even assuming an older retirement age, may still be payable for twenty years or more, as unsurprisingly the increase in retirement and pension age just reflects ever longer life expectancy.
  • Kynthia
    Kynthia Posts: 5,666 Forumite
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    What you and your employer contribute isn't really linked to what you get. You are getting a promise of 1/54th of each year's pensionable salary for every year of retirement. Plus this increase each year, pays a spousal and dependents pension, and I would guess a death on service lump sum should you die whilst still working.
    Don't listen to me, I'm no expert!
  • Muscle750
    Muscle750 Posts: 1,075 Forumite
    bigadaj wrote: »
    It's not a bad deal to the extent that you won't get anything like this offered anywhere in the private sector.

    The accrued pension, even assuming an older retirement age, may still be payable for twenty years or more, as unsurprisingly the increase in retirement and pension age just reflects ever longer life expectancy.

    Im glad someone actually agrees with me re my recent public sector against private sector pensions posts us in the private sector have been slaughtered over the years and still are
  • justme111
    justme111 Posts: 3,508 Forumite
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    bigadaj wrote: »
    may still be payable for twenty years or more, .
    It may. The chances are it will not as life expectance is 81.5 years at present.
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • Linton
    Linton Posts: 17,155 Forumite
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    justme111 wrote: »
    It may. The chances are it will not as life expectance is 81.5 years at present.

    How do you get this number? Accccording to the latest published data a male aged 68 this year has a life expectancy of just under another 19 years. This of course means that 50% of males are expected to live longer than 19 years. The expectancy for a male aged 68 in 2036 is a further 21 years.
  • justme111
    justme111 Posts: 3,508 Forumite
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    edited 13 November 2016 at 9:33AM
    I simply googled it. Besides I live amongst people and see what age they are dying at. I accept your number may be more correct to use as it shows what age today's retirees are likely to die, not what age yesterday's retirees dying now. I am a bit sceptical about these projections though. One of the questions is quality of life - I am not sure how much difference is a good pension will mean for one when one is in residential care for example. Another is whether that increase in life expectancy is actually going to materialise. There may be more medicines to cure more ilnesses but they may not be affordable neither to NHS nor individual ( although I supose if it was the case then having better income could be benefitial as it could mean the difference between being able to afford treatment or not. Do not think it would happen this way though as whatever NHS can not afford is just wiped out of textbooks so general public and often healthcare workers themselves are not aware it exists..)
    When talking about 2036 - I bet retirement age is not going to be the se as it is now. I even think it will increase more than by 2 years by which life expectancy according to your figures increases. Sure, some will live unto 90s. Some will die a month after retirement.
    When I done very aproximate calculation it looked like NHS pension 2015 when taken early with reduction will more or less be equal to what private pension with the same contributions would result in.
    If somebody knows more precise numbers they are welcome
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
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