Transfer to 2015 NHS Pension Scheme

worzel71

Hi to all Pension Experts

I am currently considering transfering from my private pension to the 2015 NHS Pension Scheme. I have receveived the transfer value which is £59,141.59. This will buy me Pensionable Earnings Credit of £234,310.04. I know that CARE/Final Salary pension schemes are generally better than a private pension but is it worth transfering as I am hoping to retire in 15 years. (fingers crossed) and what does this Pensionable Earnings Credit mean? I am 45yrs old and work part time, 28hrs per week pro rata of full time salary of around £16,500. Many thanks.

hyubh

worzel71 wrote: »

what does this Pensionable Earnings Credit mean? I am 45yrs old and work part time, 28hrs per week pro rata of full time salary of around £16,500. Many thanks.

Say you went ahead and completed the transfer; for the scheme year 2016/17, it will then be like you had additional pensionable pay of £234,310.04 over and above your actual pensionable pay for it. Times by the accrual rate (1/54) and you get the index linked pension you've bought with the transfer (£4339.07 pa), keeping in mind the NHS scheme's revaluation rate for active members is above CPI (I would assume the transfer in would get the same, though you may wish to check).

As such, in 15 years it would now be worth £4339.07 pa x (CPI + 1.5%) compounded but be heavily reduced if you actually drew the pension then given your normal pension age in the NHS scheme is your state pension age. Kept separate, and the concept of an earlier retirement reduction wouldn't apply however, assuming the private pension doesn't carry any special guarantees (unlikely).

worzel71

Thank you for your comments, am I right in saying that if I took my pension at 60 it would be reduced quite a lot because its 7 years before state pension age?

justme111

Yes. I believe it is reduced by rate of 3-5% per year depending on what year exactly it is.
Do not forget we may have another pension age increase in those 15 years

Mistermeaner

Unhelpful i know but dear god is this where all that nhs moneyvis going? (I thought the 2015 scheme was sypposed to be less generous)

Ps before you kick me im aware that the op doesnt 'get' the 200k+... but 4k per annum indexed off a 60k pot is madness

justme111

I suppose if one gets it at about 90 years of age it does not represent just as much loss to NHS ..
Actually for op I think it is more or less the same whether they go for it or not as they want to retire early.

Andy_L

Mistermeaner wrote: »

Unhelpful i know but dear god is this where all that nhs moneyvis going? (I thought the 2015 scheme was sypposed to be less generous)

Ps before you kick me im aware that the op doesnt 'get' the 200k+... but 4k per annum indexed off a 60k pot is madness

Its not "4k per annum indexed off a 60k pot" its a 60k pot plus 22 years of investment returns (possibly longer if SPA moves in the meantime).

Is that still madness?

say 4% above inflation return, take of 1.5% for the extra CARE indexation, so we can ignore it that would be a lump sum of ~£103K.
OK there are huge approximations going on there but at current annuity rates its a plausible number

Mistermeaner

4% returns and 4% index linked +1.5% annuity ..... some pretty hefty assumptions

Andy_L

Mistermeaner wrote: »

4% returns and 4% index linked +1.5% annuity ..... some pretty hefty assumptions

AIUI the pension in payment only gets CPI. CPI + 1.5 is the annual revaluation before then

justme111

Thinking about it - with abolishing of automatic lump sum and change of pension age from 60 to SPA about half of NHS pension advantage has gone.

hyubh

justme111 wrote: »

with abolishing of automatic lump sum

That isn't new - the last version of the final salary NHS scheme swapped a 1/80 pension, 3/80 lump sum structure for a 1/60 pension, no lump sum one. In itself, doing away with a lump sum was not intended to be a cost saving, which was/is rather - in a very minor fashion - in the commutation rate introduced at that time (12/1) and people freely exercising their right to commute.

and change of pension age from 60 to SPA

You've missed out the 2008 scheme again, when the NPA went up to 65.

about half of NHS pension advantage has gone.

I think you've flipped from one extreme position to another

On your original musing - I'd have to double check, but I'd be reasonably confident that non-Club transfer credits are intended to have the same value on an actuarial basis under the CARE scheme as they were immediately before. As such, the factors used are actually more 'generous' than before April 2015 because there is no longer a salary risk to the scheme.

That said, there either has been or will be an imminent slight worsening of non-Club transfer in credits... however this will be per the Chancellor's change in the discount rate used as announced at the last Budget, which had nothing to do with final salary vs. CARE, but about valuing scheme benefits for the government's internal accounting purposes.