NHS Pension Choice - dilemma due to Hutton Report?

Amyw

I am in my mid-thirties and have worked for the NHS for the past 12 yrs. I am currently under the 1995 scheme and have to decide within the next week whether to opt out of this and into the 2008 scheme.

The key difference between the two schemes seems to be when you will retire / leave the NHS. If I retire at 60 the 1995 scheme is more favourable, if I retire after 65 the 2008 scheme is more favourable. Deciding would be relatively straight forward if it was not for the likely new pension arrangements following Lord Hutton's report.

From what I gather the likely outcome is for a new pension scheme to emerge by 2015 that results in one's NHS pension maturing in line with state pension age (in my case 67). Am I correct in that everyone will be forced to switch to whatever this new scheme is (so in effect having two different pension schemes - 1995 or 2008 AND whatever the new scheme is)?

If this is the case and the new scheme does not mature until I'm 67 then I can see that I need to switch my existing accrued pension into the 2008 scheme. If this is not the case then I'd stick with the 1995 scheme (as I would prefer to retire at 60) HELP!

dunstonh

From what I gather the likely outcome is for a new pension scheme to emerge by 2015 that results in one's NHS pension maturing in line with state pension age (in my case 67). Am I correct in that everyone will be forced to switch to whatever this new scheme is (so in effect having two different pension schemes - 1995 or 2008 AND whatever the new scheme is)?

There are generally three different methods used when updating a scheme.

1 - all existing members stay on their existing scheme and changes only apply to new members
2 - You are forced to move over to the new scheme for future membership only and that your entitlement built up on the old scheme will remain in place.
3 - Your old pension is closed and bulk transferred to the new one.

Option 1 isnt being considered with the NHS. Option 2 appears to be the most likely one. So, your 1995/2008 entitlement will remain within those scheme rules but future build up of entitlement will be on "2015" (or whatever they call it).

If this is the case and the new scheme does not mature until I'm 67 then I can see that I need to switch my existing accrued pension into the 2008 scheme. If this is not the case then I'd stick with the 1995 scheme (as I would prefer to retire at 60) HELP!

On the basis you want to retire at 60, will you have the finances in place to do that? It may be an aspiration but is it realistic? you are looking at going three years before the current national average retirement age and 7 years (probably 8 as the 68 age is likely to be brought forward with possibly a 69 and 70 introduced) before the state pension age.

Amyw

Thank you very much for your reply.

It was helpful that you clarified that option 2 is the likely outcome post 2015. The pensions choice helpline were far from helpful as they kept saying I should make my choice based on the forecast they have given me now as opposed to what may happen in 2015 (saying for example that it may be that pensions do not change at all as a consequence of the Hutton report - something that as far as I can see is unlikely).

If there was no change and I could remain on the 1995 scheme then I would have a modest but liveable pension when aged 60. If I do have to move onto a scheme in 2015 which matures at state pension age (which for me will be 67) then there is no way I could afford to retire at 60 (as the pot I have accrued to date is relatively small as I have only been working in the NHS for 12 years).

All in all it looks as if I will be better off switching to the 2008 scheme as it seems very unlikely indeed that I will be able to keep a public pension scheme that matures at 60 for the remainder of my NHS career (when state pension age is rising as you say). The 2008 scheme provides some flexibility as it is based on best 3 yr salary in last 10 years of work, so it may be that I am still able to drop my hours later in my career.

Thanks again,

Amy

CLAPTON

I don't know the full details of either scheme but
personally I would want to build up as many years as possible in a scheme that lets me retire at 60 rather than 67
once you opt for 67 there is no going back.
even if now you don't think your will want to retire 60 you are only in your thirties so that's a long time
many you would retire from NHS at 60 and get a parttime job.. nice to have some secure income coming in even you still need to supplement it.

atush

I agree. To keep maximum flexibility I would stay a member of the Age 60 scheme, and carry on adding years to the 2008 scheme. Then choose what you do going forwards after the 2015 scheme has been announced. You may be best off with the 3 seperate schemes.

Amyw

My concern with keeping on with my 1995 (retire at 60) scheme if I can't afford to retire at 60 is that the scheme does not pay out esp well for any years worked above 60. The 2008 scheme which I am being given the option of moving to is more favourable if I end up working to 65 and beyond.

What I have not been able to clarify with the pensions choice team is whether I could 'retire' and claim the 1995 pension from this scheme aged 60 but still continue to work (accruing under whatever scheme I am placed in from 2015).

Amyw

Just been told if I retire at 60, I will not be eligible to make any further pension contributions if I then return to work in NHS p/t.

Yorkie1

It might be how I'm reading it but your thinking seems to overlap schemes. I must say at the outset that I'm not familiar with the NHS scheme, but assume that the Govt will want it to be similar to the other civil service schemes in principle even if the details are different.

On the CS scheme, we have been told the likely position when the revised post-Hutton arrangements come into force will be:

a) current pension entitlement is frozen at that point, calculated on the best of the last 3 years' salary. The pension can be taken at that scheme's retirement age (i.e. 60 for most people). I have a feeling that it may become uprated through CPI rather than RPI, thus devaluing its eventual worth though. From your posts, I think both the 1998 & the 2005 schemes would be frozen at this point - or is it your understanding that the 2005 scheme will not be frozen at this point / superseded by the new rules?

b) any contributions after that point are into the new scheme, calculated and claimable on those rules - which are not yet agreed or confirmed. There have been suggestions that it may be based on average career salary, and claimable at the time of the state pension.

Amyw

Just to clarify - you mean the 1995 scheme would be frozen and start paying me out a small pension when I reached 60 even if I was still in employment (because the post Hutton scheme meant I needed to work until 67)?

butterfly72

Yorkie1 wrote: »

a) current pension entitlement is frozen at that point, calculated on the best of the last 3 years' salary. The pension can be taken at that scheme's retirement age (i.e. 60 for most people).

Wouldn't it be frozen and then paid according to final salary at 60 or 65 depending on the scheme and not whatever your salary is at 2015?

Andy_L

Amyw wrote: »

Just to clarify - you mean the 1995 scheme would be frozen and start paying me out a small pension when I reached 60 even if I was still in employment (because the post Hutton scheme meant I needed to work until 67)?

Yes, although nobody really knows for certain as its still being discussed.

The likeliest outcome (based on what has been said so far) is that your accrual under the 1995 scheme will end however your ~16 years (as it would be by then) will still be linked to your final salary, rather than being defered and only gaining inflation adjustments.
Thus transfering to the 2008 scheme is unlikely to make any difference as the same thing would happen to that scheme - in fact you'd probably be worse off as you'd have to wait 5 years for the same pension