The effect of the 1995/2008 choice on NHS Preserved Benefits

Dear Friends,

My mother is 62 and is a Registered Nurse, planning to retire at 65. She is currently making the choice between the 1995 and 2008 NHS Pension Path "sections". She most likely will choose the 2008 section.

She has had two periods of contributions - one before having me and my sister ('66-'83, spanning 17 years) and one after ('02-present, spanning the last 8). When she took her break in '83, her benefits were "preserved".

Her last years of the first period of contributions consisted of:
  • 4 years full time as a midwifery sister, ('75-'79) followed by:
  • 2 years part time as a staff midwife, ('79-'81, following the death of her father) followed by:
  • 1 year full time midwifery night sister ('81-'82), followed by maternity leave ending April 83. P60 for year ending '82 was £7227, and P60 for y/e '83 was £7835.
  • During this period, her wages increased incrementally between '75-'79 and then dropped significantly to part time staff midwife level. It then increased incrementally from '79-'81 and then jumped up again significantly to full time midwifery night sister (see graph).

We have one important question:
    It clearly states on page 9 of "Your NHS Pension Choice Guide" that the 2008 section will base the benefits on "the annual average of the best three consecutive years pay in the last ten years, re-valued by the increase in the retail prices index". This, of course, is in relation to the final period of pensionable pay before retirement... However.... What is the first period of pensionable pay (ie in Mum's case, '66-'83) based on? Is it based on this annual average of the best three consecutive years before the period ended... or is it based, according to the 1995 rules, on the best year of the last 3 years before the period ended? Or is it based simply on the final P60 of this first period.... Or, is it based on something completely separate? In other words, what are preserved benefits based on?!........ Or, does choosing the 2008 section automatically void the preserved benefit completely?

The answer to this question is of crucial important to my mother's pension choice due to the significantly decreased period of pay between '79 and '81 followed by the far higher pay between '81 and '83. If the choice between 1995 and 2008 affects how this first period of pay is pensioned, she could stand to lose out considerably by choosing the 2008 section?

We've probably completely overcomplicated things here but your kind advice would, as always, be very gratefully received!

All the best,

Jim (on behalf of mum!)

Comments

  • As i understand the 2008 agreement overrides allother agreements meaning that the average of the best 3 years of ANY time of work. There should be a pension officer in her hospital to talk to. anyway if she is leaving at 65 i recommend the 2008 section. in very rough terms she will get half her salary on the old system and two thrids on the new. though the lumpsum comes from that fund.
    I have also heard that al service above 60 is not counted under the previous agreement as retirement occurs at 60 there.

    my dad is 61 and retiring for him they gave him calculation of hw much he will recieve at any one point on either system.

    I think i'm correct but as i say talk to your pension officer, get all the figures in black and white
  • Hi

    There is a national exercise comparing the two schemes just now. Your mum should be given illustrations. There is a traffic light recommendation as to whether she is better off in the 95 or 2008 scheme. The contacts are via the pension website. Good luck

    HHx
  • snowgo
    snowgo Posts: 148
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    They are currently sending out personalized statements to all nhs staff, starting with those age 55 and over. Got mine 2 weeks ago. Clearly gives the figures for how much pension & lump sum you will actually get under each scheme. Also how it will affect your pension if you take a larger lump sum.

    I don't know if your family member will get 2 statements. But the pensions officer in her Payroll Dept will be able to answer. Don't make any decision until she sees the comparisons for her own circumstances under each scheme. I'm retiring in January & staying in 1995 section is much more advantageous for me. But each person's situation is different which is why it's so important she decides on the basis of her own personalized statement.
  • DON'T move from the 2005 scheme to the 2008 scheme. Considering your mothers length of service, the former is PROBABLY A better option.

    If you are in any doubt, go and see a INDEPENDENT pension advisor. IT will cost you a few hundred quid but will save you thousands.


    this is a really important decision, and if you are not qualified to make it, then let an EXPERT guide you.

    you can not make it on a hunch.

    good luck.
  • iinvestor wrote: »
    DON'T move from the 2005 scheme to the 2008 scheme. Considering your mothers length of service, the former is PROBABLY A better option.

    If you are in any doubt, go and see a INDEPENDENT pension advisor. IT will cost you a few hundred quid but will save you thousands.

    this is a really important decision, and if you are not qualified to make it, then let an EXPERT guide you.

    you can not make it on a hunch.

    good luck.

    actually the length of service and retiring at 65 is the only reason i would recommend changing to the 2008

    you see in the 1995 system you would get:
    final salary years X service /80 each year
    in the 2008 system:
    avergae of best 3 years salary X service/60


    1/60th is better than 1/80th

    again 40 years on 30k will be 20k a year on the new system
    15k a year on the old.

    still you should get more 'Official' info in the future
  • Andy_L
    Andy_L Posts: 12,766
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    actually the length of service and retiring at 65 is the only reason i would recommend changing to the 2008

    you see in the 1995 system you would get:
    final salary years X service /80 each year
    in the 2008 system:
    avergae of best 3 years salary X service/60


    1/60th is better than 1/80th

    on the old 1/80ths scheme you also get a 3x lump sum, the new scheme is only better in that respect if you want income instead of the lump sum
  • Are Pensions advisers like Mortgage advisers? Can one just walk into an IFA/Bank etc and ask to speak to someone?

    Someone I know is considering tranferring between schemes and is confused as heck.
    Tough times never last longer than tough people.
  • getmore4less
    getmore4less Posts: 46,882
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    you see in the 1995 system you would get:
    final salary years X service /80 each year
    in the 2008 system:
    avergae of best 3 years salary X service/60

    The key point of the 1995 is the best of the last 3 years so you can enhance the pension by working a year of high enhanced shifts.

    the 2008 is the average of the best 3 in the last 10 so much harder to enhance but the 1/60 against 1/80 with 3 time lumps sum is not so easy to compare.


    I am no expert but don't the early years just count as years and the pension is based on the cuurent pay. (note part time pay is gross up to full time equivilent for pension purposes)


    Another option is to look at retire now take the pension and return to work
    pension index linking may be nearly as good as adding years. when you consider it is cash now and you can still work.
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