NHS Pension Choice - 1995(deferred) or 2008 section

Jonah7

Hi,

My wife (age 46) has recently rejoined the NHS after abreak of several years, consequently she has to join the 2008 scheme. However, she has some deferred benefits from the 1995 scheme and the option of transferring them to the 2008 scheme (6 years 47 days equivalent) or leaving them in the 1995 scheme.

Anyone any advice or suggestions of things to consider; at the moment she is planning on remaining in the NHS until retirement at age 65.

Many thanks.

dunstonh

There have a been a few thread on this recently. Indeed, one just a few days ago. So, do a forum search under the pension section and you should get various comments.

snowcat53

Yes there was another thread recently

She should get a quote from NHSBA as to how many years they will offer her in the 2008 scheme. I don't know but because the retirement age is 65 (2008) rather than 60 (1995) she might well get offered more years than her current 6 and a bit if she transferred.

Koicarp

My understanding snowcat is that if she is intent on working until she is 65, the better accrual rate in the 2008 scheme would suit, but I don't think there is a lump sum in the 2008 scheme?
Personally I'm staying in 1995 section until they drag me out, and I'm not working a day past 60 either.

snowcat53

Koicarp wrote: »

My understanding snowcat is that if she is intent on working until she is 65, the better accrual rate in the 2008 scheme would suit, but I don't think there is a lump sum in the 2008 scheme?
Personally I'm staying in 1995 section until they drag me out, and I'm not working a day past 60 either.

Yes it is sixtieths in the 2008 scheme and eightieths in 1995. There is no automatic lump sum in 2008 but you can take one if you wish by commuting some pension (giving up 1000 pa pension gives you a lump sum of 12k).

Jonah7

Thanks everyone,

I have seen the recent threads but as they applied to someone in continuous service I thought the situation would probably be different.

My feeling is that, given she is hoping to remain working in the NHS until 65 and also hoping that her salary will increase, she will be better off transferring to the 2008 scheme; but I haven't (don't know how to) done the sums.

snowcat53

Jonah7 wrote: »

Thanks everyone,

My feeling is that, given she is hoping to remain working in the NHS until 65 and also hoping that her salary will increase, she will be better off transferring to the 2008 scheme; but I haven't (don't know how to) done the sums.

If she leaves the previous service in 1995 scheme, the pension when she takes it will be based on her salary at the end of that bit of service uprated by CPI figures since. Whether this is likely to be more or less than her final salary is something you have to figure out.

LazyD

I'm confused about this NHS 1995 or 2008 Sections stuff. I'm trying to work out what is best for a family member who needs to make the decision soon. In this case it will be based on 15.5 years of contributions.

Most comments I've read on the internet say that they will be sticking to the 1995 as it's obviously some sort of money saving exercise for the government by offering the switch to 2008 section.

I have done a few sums with the figures received from nhs pensions and to me it looks like the 2008 section is almost always better for my relative. Especially since she wants to receive as big a lump sum as possible unless there is a very good incentive not to (which I can't really see). So at the moment we are more for the 2008 section with maximum lump sum, the only thing putting us off is the amount of people on the internet saying they are sticking with 1995 section!
Here are some of the figures for my relative (I haven't included what the annual or weekly pension would be, instead I've grouped them into totals in 5, 10 and 20 year intervals):

Comparison of 1995 Section with 2008 Section

£63495 Total amount received after 5 years including lump sum of £23810 - 1995 Section

£56088 Total amount received after 5 years including lump sum of £5448 - 2008 Section



£103180 Total amount received after 10 years including lump sum of £23810 - 1995 Section

£106728 Total amount received after 10 years including lump sum of £5448 - 2008 Section



£182550 Total amount received after 20 years including lump sum of £23810 - 1995 Section

£208008 Total amount received after 20 years including lump sum of £5448 - 2008 Section



Equal Lump Sum

1995 Section - Same as above

£109790 Total amount received after 10 years (with lump sum of £23810) - 2008 Section

£195770 Total amount received after 20 years (with lump sum of £23810) - 2008 Section


Maximum Lump Sum

£106297 Total amount received after 10 years including max lump sum of £42517 - 1995 Section

£113378 Total amount received after 10 years including max lump sum of £45348 - 2008 Section


£170077 Total amount received after 20 years including max lump sum of £42517 - 1995 Section

£181408 Total amount received after 20 years including max lump sum of £45348 - 2008 Section

We are considering changing to the 2008 section and asking for maximum lump sum at pensionable age. What do others think of this?

One last thing is that I have heard about the triple final salary lump sum, has this been completely abolished? Some pages I've read on the internet seem to think that with the 1995 Section it is still in place (which would obviously change everything) but is not a choice with the 2008 section, whilst other pages seem to have no mention of it at all.

Would greatly appreciate any help, thanks.

jem16

LazyD wrote: »

We are considering changing to the 2008 section and asking for maximum lump sum at pensionable age. What do others think of this?

1995 section has a retirement age of 60. 2008 section has a retirement age of 65.

One last thing is that I have heard about the triple final salary lump sum, has this been completely abolished?

There was never a triple final salary lump sum.

What there has been, and still is for the 1995 section, is a 3 times annual pension lump sum. So if you had an annula pension entitlement of £15,000 you would have an automatic lump sum of £45,000.

In the 2008 section you have to commute some of the annual pension to get a lump sum. If you take the same lump sum as the 1995 section, it's more or less equal as a 1/80ths scheme with automatic lump sum is the same as a 1/60ths scheme with commutation for a lump sum.


As to whether or not to take the maximum lump sum, that depends on what you want it for. With a commutation rate of 12:1 for public sector pensions, it's bad value if you are taking the higher lump sum to invest for income.

Andy_L

LazyD wrote: »

Here are some of the figures for my relative (I haven't included what the annual or weekly pension would be, instead I've grouped them into totals in 5, 10 and 20 year intervals):

Comparison of 1995 Section with 2008 Section

£63495 Total amount received after 5 years including lump sum of £23810 - 1995 Section

£56088 Total amount received after 5 years including lump sum of £5448 - 2008 Section

I can't follow your numbers, the lump sum in the 95 scheme should be 3x the annual pension (~£38k in the 5 year example if I understand it) whilst there should be no lump sum in the 08 scheme.
In addition the 95 scheme will pay out in full 5 years earlier

LazyD

Sorry for hijacking the thread Jonah7.

Thanks for your replies.

Andy L, sorry I should have been clearer. Those figures are derived from a total of 5 times (or 10 or 20 where it says) the annual salary plus the lump sum. The figures of the annual salary and lump sum come from the documents we have received from nhs pensions.

i.e. for the line that says:

£63495 Total amount received after 5 years including lump sum of £23810 - 1995 Section

63495 is the total, minus the lump sum of 23810 is 39685, that divided by 5 is 7937. So in the case of that line the annual pension would be £7937 and the lump sum would be £23810. Same thing applies for all the other lines.

Sorry if it was confusing but I basically intended to present the differing sets of figures totals in different time intervals to illustrate that x offer would end up totalling more (or less, whatever the case may be) over different periods of time in comparison to y offer, if you see what I mean?

Jem16, I understand that 2008 section has a retirement age of 65 and it will certainley be the case that my relative will be working until she is 65. Thanks for the clarification on the 3 times thing. So I guess in this case that the lump sum figures I presented on the lines that detail the 1995 section are 3 times the annual pension entitlement?

The reason the 2008 section (with max lump sum) has been looking more attractive to us is because it would be desirable to get a larger amount sooner for purposes of a mortgage down payment. Without this larger lump sum it seems unlikely that she would be able to raise these funds (for the desired down payment). With this in light, do you think it enhances the value of taking the lump sum and losing out somewhat on future income overall?