NHS Pension Estimate

Felicity111

I'm wondering if someone could advise please as I'm having a really hard time getting any information about the my NHS pension's future possible value from the relevant departments.

Both NHS Pensions and my own Trust's pension officer seem incredibly reluctant to provide me with any information about what my pension might be at my normal pension age. I realise this would be a complete estimate but shouldn't this info be provided?

I'm in two sections (1995 and 2015) and so I'm finding it really difficult to work out what the 1995 bit might be at age 60 and what the 2015 section might be at age 65.
I've received a 'pension statement' from NHS pensions which basically just tells me what my 1995 section pension is up to 31/03/2015 and then what my 2015 section bit is up until 31/03/2016. I was rather hoping they would be able to give me some information about what this might be at age 60 and 65 - I'm 41 now but obviously wanting to make additional provision now should I need to.

The answer I got from NHS pensions was:


'As you are no longer contributing to the 1995 section, these benefits are now deferred. This section increases annually with inflation. As we are unable to predict inflation, we are unable to state what your pension will be at 60.

Due to the change to the 2015 pension arrangements, it is not possible to produce a projected estimate. This is because the Scheme is a Career Average Revalued Earnings (CARE) scheme and you earn a pension based on each Scheme year's actual earnings'

I realise they can't predict inflation and I realise that the new 2015 section is a CARE scheme so they can't possibly know my career average. However, they used to provide final salary predictions and they couldn't predict my final salary or inflation then either. I don't understand why the new 2015 section and the fact that the 1995 section is deferred means that they can't estimate using approximates and averages as surely that's what they would have used to some extent before?

I don't pretend to understand much about pensions and so it's entirely possible that I am being unreasonable but I wondered if someone could shed a bit of light on this. My husband receives annual pension statements and projections that he consults on an annual basis to monitor how his retirement plans are coming along. His pension officer explained that these forecasts are based on assumptions and taking certain factors into consideration so really underlined the fact that they are estimates. I guess I wanted to do the same and I'm surprised at how unforthcoming this information is from the NHS. Am I being unreasonable?

Many thanks in advance for any thoughts/advice - much appreciated

xylophone

http://www.nhsbsa.nhs.uk/Documents/Pensions/SD_Guide_(V16)_04.2016_-_Digital.pdf

https://www.bma.org.uk/advice/employment/pensions/inflationary-increases-to-pensions-faqs

GunJack

on your 1995 section, take the last value you have, pop it into a compound interest calculator like this one:-

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

compound once a year at the end of the year, years to grow should be number of years left from now to normal retirement age of the 1995 scheme, and take a stab at 1.75% per year for inflation. That'll give you an idea of what that part of your pension will be worth.

As for the career average, more complex...

Silvertabby

It's because you are so young (in pensionspeak!).

Taking your 1995 benefits first, your current quotation will increase by CPI. There's not a pension scheme in the land that will give you an estimate at 60 based on what they think inflation will be. One way to look at it is that as this pension will increase with inflation, it will buy you the same amount of goods that your current pension would buy today. ie, in theory, if your current pension would buy you a basket of groceries costing £100, then your pension at 60, regardless of how much it is, would buy you the same basket of goods.

Same goes for your career average benefits - you may be able to hazard a guess at any future pay increases, but your annual pension accrual is revaluated in line with CPI.

System

Hi

"I've received a 'pension statement' from NHS pensions which basically just tells me what my 1995 section pension is up to 31/03/2015 and then what my 2015 section bit is up until 31/03/2016."

The 1995 pension part will, as others have mentioned, be a Deferred Benefit.

An example might be...

Start Date 01/01/2000 Full Time
End Date 31/03/2015 Full Time

Service 14/090 thats 14 years and 90 days.
This is then divided by the scheme type, for example 80ths.
14.246575 / 80 = 0.178082 which becomes 17.8082 % of your salary.

So lets go with £18K 18000 * 0.178082 = £3205.48 per year pension.

This gets increases annually for inflation, so hopefully it will retain it's spending power over the next 20+ years.

If you like to PM me any figures quoted on your staement I will try and help if I can.

hugheskevi

'As you are no longer contributing to the 1995 section, these benefits are now deferred. This section increases annually with inflation. As we are unable to predict inflation, we are unable to state what your pension will be at 60.

If you transitioned into the CARE scheme in 2015 from the 1995 scheme, the 1995 benefits will remain linked to your final salary until you leave the CARE scheme. They are not deferred and they will not increase with inflation in the way a deferred pension would (you are technically still an active member of the scheme, not a deferred member, albeit not accruing any further service). It is only if the 1995 pension was accrued from a previous period of service that it would be a deferred pension award.

Thicko2

One little error quoted in some of the replies.

Your pre 2015 service is still based on your final salary when you retire.

So in a world of 1% pay rises and 2 to 3% inflation, it is currently being eroded.

Promotions and increments will still affect the value of your pre 2015 service counter to the above.

Converseley post 2015 service is accruing at 1/54 per year, than year each inflated by CPI plus 1.5%.

There were some good calculators around at the time of the proposals being consulted upon, I will look.

saucer

They seem to have taken the calculators off the NHS Pension websites

Felicity111

Thank you so much everyone for your replies. I will be back with my figures I've got some information that will maybe help me to figure things out with your fantastic explanations.

And yes, the NHS pension calculators have mysteriously disappeared lately...

Maelwys

Felicity111 wrote: »

And yes, the NHS pension calculators have mysteriously disappeared lately...

Spreadsheet versions are still available here

(The 1995 and 2008 ones seem grand, but the 2015 version might take a bit of tweaking depending on your State Pension Age, since it makes a few assumptions that you can't easily change unless you unprotect the sheet. It also tries to apply CPI/Inflation increases which might skew things a bit if you're trying to see what you'll get in "today's money")

In any case, combining the calculators should give you a rough idea of what to expect. Note that if you're intending to take your pension early/late then you'll likely also want to factor in Actuarial Reduction tables - see the links here.

jimi_man

You haven't said what your earnings are, so any estimates are guesswork only. However for someone earning a salary of £30K, who is 41 and thus has two years already in the 2015 pension with 26 to go until 67 (Pension age) it's not difficult to work out the figures.

Every year that person builds up a 'pot' (figuratively speaking) of £555 and every year that individual pot gets increased by CPI + 1.5%. So there will be 28 separate 'pots', each one with a compound rate of increase of between 1 and 27 years. When you add those pots together then that's your pension. Ignoring CPI since it would be guesswork, it's fairly easy to work that figure out in an XL spreadsheet (and I'm not exactly an expert however it's rather tedious by hand) to give a figure in today's money.

So 28 years will give a pension of just under £19K.

Obviously if you don't earn that then you'll need to extrapolate the correct amount to give you the right figure for your earnings.

You obviously have a calculator for the 1995 pension; but it's a standard final salary scheme so it can pretty much be done in your head.