NHS Pension Confusion

andy001

Good info.

2015 is not as great as 1995 but still good!

Windofchange wrote: »

Hi Adam,

You've had some brilliant advise already, and I can only echo - STAY IN THE NHS PENSION SCHEME!!

I also work in the NHS, and up until recently was pretty similar to you probably in not fully understanding how it all worked. There are basically three sections:

1) The 1995 scheme
2) The 2008 scheme
3) The 2015 scheme

Which one you were in will depend on your length of service. If you joined before 2008, you will likely be in the 1995 section, if you joined between 2008 and 2015 you will likely be in that one, or after 2015 in that one. I remember a while back we had a pack that said basically we are moving you to the 2015 scheme, which is to my understanding better than the 2008 section. You will likely be in the 2015 section if you are a recent joiner.

Again, as others have said, you pay in, but what you pay in is just a membership fee. End of each year, you accrue 1/54th of that years salary, and that is then revalued each year until you hit retirement. So, in 40 years of service for instance, you will have built up 40 pots of money, which will have been revalued each year, and the sum of those 40 pots will be your yearly pension. Very simply, if you build £500 a year, you would receive 40 x £500, so £20,000 per annum as your pension - this is very basic and ignores the revaluing of your pots each year. The reality is your yearly income would be much higher.

Things to bear in mind.

1) Things like bike to work, PCP car deals etc take away from your pensionable pay, so will affect your final sum. It won't be dramatic if you just did it once for a few years in your career, but if you did it regularly that could add up.

2) Pensionable pay does not include overtime payments - your pot for each year is just calculated on your actual base pay. This is a shame as I log thousands of pounds of overtime - probably about a third ontop of my actual base salary.

3) The 1995 section was supposedly the best, but unfortunately that has closed a long time ago to new applicants. I think that our current 2015 section however is outstanding, and if you build up enough years service, you will retire very comfortably. I don't know what you do, or what your career prospects are, but think of this:

40 years of service. If you start as a band 5 clinical as an example, that is around £25k London, £21k elsewhere. If we take London as that is my area:

Year 1 pot somewhere around £400. You then go up through the pay bands, get some promotions and end up year 40 as a Band 8a/b/c. Your pot for that year may be in the region of £1200 - £1500 or so (at current prices, a 60 - 90k salary).

So, if you had done 10 years at band 8 level, you will have accrued around £15k per year of pension just in those ten years, let alone the 30 preceding that. I joined a little later having had a career before, but even I can expect to have 30 - 35 years of service assuming I stay in the NHS. Having already been promoted a couple of times from graduate level, I am also quite hopeful that I will end my career at a decently senior level. A rough guesstimate will be that I will quite easily be a higher rate tax payer once my NHS pension is added to my state pension, and that is added to any annuity I buy with the sizeable pot I built in the private sector prior to joining the NHS. Retirement for me looks pretty rosey!

TL;DR - Stay in the NHS scheme!!

Adamc

Windofchange wrote: »

Hi Adam,

You've had some brilliant advise already, and I can only echo - STAY IN THE NHS PENSION SCHEME!!

I also work in the NHS, and up until recently was pretty similar to you probably in not fully understanding how it all worked. There are basically three sections:

1) The 1995 scheme
2) The 2008 scheme
3) The 2015 scheme

Which one you were in will depend on your length of service. If you joined before 2008, you will likely be in the 1995 section, if you joined between 2008 and 2015 you will likely be in that one, or after 2015 in that one. I remember a while back we had a pack that said basically we are moving you to the 2015 scheme, which is to my understanding better than the 2008 section. You will likely be in the 2015 section if you are a recent joiner.

Again, as others have said, you pay in, but what you pay in is just a membership fee. End of each year, you accrue 1/54th of that years salary, and that is then revalued each year until you hit retirement. So, in 40 years of service for instance, you will have built up 40 pots of money, which will have been revalued each year, and the sum of those 40 pots will be your yearly pension. Very simply, if you build £500 a year, you would receive 40 x £500, so £20,000 per annum as your pension - this is very basic and ignores the revaluing of your pots each year. The reality is your yearly income would be much higher.

Things to bear in mind.

1) Things like bike to work, PCP car deals etc take away from your pensionable pay, so will affect your final sum. It won't be dramatic if you just did it once for a few years in your career, but if you did it regularly that could add up.

2) Pensionable pay does not include overtime payments - your pot for each year is just calculated on your actual base pay. This is a shame as I log thousands of pounds of overtime - probably about a third ontop of my actual base salary.

3) The 1995 section was supposedly the best, but unfortunately that has closed a long time ago to new applicants. I think that our current 2015 section however is outstanding, and if you build up enough years service, you will retire very comfortably. I don't know what you do, or what your career prospects are, but think of this:

40 years of service. If you start as a band 5 clinical as an example, that is around £25k London, £21k elsewhere. If we take London as that is my area:

Year 1 pot somewhere around £400. You then go up through the pay bands, get some promotions and end up year 40 as a Band 8a/b/c. Your pot for that year may be in the region of £1200 - £1500 or so (at current prices, a 60 - 90k salary).

So, if you had done 10 years at band 8 level, you will have accrued around £15k per year of pension just in those ten years, let alone the 30 preceding that. I joined a little later having had a career before, but even I can expect to have 30 - 35 years of service assuming I stay in the NHS. Having already been promoted a couple of times from graduate level, I am also quite hopeful that I will end my career at a decently senior level. A rough guesstimate will be that I will quite easily be a higher rate tax payer once my NHS pension is added to my state pension, and that is added to any annuity I buy with the sizeable pot I built in the private sector prior to joining the NHS. Retirement for me looks pretty rosey!

TL;DR - Stay in the NHS scheme!!

Such a helpful post! Thanks so much.

Adamc

mollycat wrote: »

Shift enhancements will count when calculating your pension entitlement based on your best years pay out of your final 3 years pay,

Overtime does not.

Prior to your final 3 years of employment neither is relevant.

** Above true for 1995 Section**

Is that final three years of full time work? I had planned on dropping days in the later years from 5 to 3 days of that option is available.

Also did I read that my student loan repayments take away from the pension? Thanks

Andy_L

Adamc wrote: »

Is that final three years of full time work? I had planned on dropping days in the later years from 5 to 3 days of that option is available.

Final 3 calendar years of work, either full or part time. However if it is part time they use the FTE salary so you don't lose out

adamcarvell

sorry to jump in im a band 2 joined last june aged 51 what sort of pension would i get if i stayed 16 pots of band 2 ?.

were

mollycat wrote: »

Shift enhancements will count when calculating your pension entitlement based on your best years pay out of your final 3 years pay
** Above true for 1995 Section**

Mollycat I am also under section 1995, and as you state this will not relate to Adamc, and we get £year/80 of final salary.

As said, it is one of the best pensions going, but also a few caveats:

There is lots of money tied up in the pension scheme and in my 20+ years with the NHS, has been changed 3 times, usually not for the better. There seem to be a few envious eyes watching it, and they would love to grab the cash. NHS is about the 5th largest employer in the world.

Working age has become longer. Generally speaking from derived pension stats, a man retiring at 60 will on average live about 14 years longer. That same man retiring at 65 has an average of 2.7 years left after retirement. Researchers and academics etc. live longer - the general idea it is the stress that kills you.

Many people do not make it to band 7, 8, 9, some people even get demote in banding. One of my collogues has been demoted twice, thanks to restructuring, and due to this lost value in his pension due to paying in more than his final salary.

As you get older, often ill health sets in. My department at the time only had about 90 people and out of that lot, two in their thirties died of cancer, one in his 50's cancer, and at least 4 people whom I personally know had/has heart issues.

Do not rely on your nhs pension as your only vehicle of income, or pension.

Many leave the NHS, do private work, and the pension gets frozen. Very rarely there is any benefit to transfer it.

~~~~~~~~~~~~~~~~~~~~
adamcarvell, it depends which pay level you stepped in, yearly progression, and what age you retire. I took a quick look and got this, but someone will hopefully come back with a better estimate, or look here https://www.nhsbsa.nhs.uk/member-hub

AfC Band 2 – care support workers, secretaries. Think you will need to have 2 years of service before you can claim.

Year 1 Point 2 £15,404 Pension £285.26
Year 2 Point 2 £15,671 Pension £290.20
Year 3 Point 2 £16,103 Pension £298.20
Year 4 Point 2 £16,536 Pension £306.22
Year 5 Point 2 £16,968 Pension £314.22
Year 6 Point 2 £17,525 Pension £324.54
Year 7 Point 2 £18,158 Pension £336.26
Year 8 Point 2 £18,158 Pension £336.26
Year 9 Point 2 £18,158 Pension £336.26
Year 10 Point 2 £18,158 Pension £336.26

Missing, pay increases, annual inflation, and no higher cost of living increase in this calculation so after working 10 years get £3163.68

Some at work have invested also in housing to supplement the pension.

Some of our high earners have left the pension scheme, investing overseas as this gives them over 20% a year income.

hyubh

were wrote: »

As said, it is one of the best pensions going, but also a few caveats:

There is lots of money tied up in the pension scheme and in my 20+ years with the NHS, has been changed 3 times, usually not for the better. There seem to be a few envious eyes watching it, and they would love to grab the cash.

Hmm, what cash - it's an unfunded scheme. And benefit changes have been relatively minor once the 'special class' anachronism was removed.

Generally speaking from derived pension stats, a man retiring at 60 will on average live about 14 years longer. That same man retiring at 65 has an average of 2.7 years left after retirement.

That's completely false. The national life expectancy at age 65 for men is just under 19 years years:

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/lifeexpectancyatbirthandatage65bylocalareasinenglandandwales/2015-11-04#national-life-expectancy-at-age-65

One of my colleagues has been demoted twice, thanks to restructuring, and due to this lost value in his pension due to paying in more than his final salary.

Why did he not apply for pay protection?

https://www.nhsbsa.nhs.uk/sites/default/files/2017-04/Protection%20of%20%20Pay%20and%20Voluntary%
20Protection%20of%20Pay%20Factsheet-20170217-%28V3%29_0.pdf

Many leave the NHS, do private work, and the pension gets frozen.

No, it becomes deferred (preserved) and rises with inflation. If it were literally 'frozen', it would progressively lose value in real terms.

Very rarely there is any benefit to transfer it.

Indeed, but in most cases it isn't possible to transfer it anyway, since 2015.

Some of our high earners have left the pension scheme, investing overseas as this gives them over 20% a year income.

I'd imagine the real reason they opted out is because their pension benefits are so generous they have been advised they will breach the Lifetime Allowance if they stay in...!

were

hyubh wrote: »

Hmm, what cash - it's an unfunded scheme. And benefit changes have been relatively minor once the 'special class' anachronism was removed.

For consultants whom became head of service for the final two years before retiring was a great scheme. Unfunded, or funded there is still cash there.

That's completely false. The national life expectancy at age 65 for men is just under 19 years years:

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/lifeexpectancyatbirthandatage65bylocalareasinenglandandwales/2015-11-04#national-life-expectancy-at-age-65

Great, the pensions manager was lying to me. I did question the 2.7 years though

Why did he not apply for pay protection?

That link did not work for me, thanks though. Pay was only protected for 3 years. Think you had to be 51 or older for that to happen, and both times he was younger.

No, it becomes deferred (preserved) and rises with inflation. If it were literally 'frozen', it would progressively lose value in real terms.

Apologies, my wording was wrong.

I'd imagine the real reason they opted out is because their pension benefits are so generous they have been advised they will breach the Lifetime Allowance if they stay in...!

Ah, you could be correct. They are on 8a plus 10k RRP, plus other forms of income. The other guy was band 9.

adamcarvell

stepped in at point 1 of band 2 first time working foe the nhs in the sterile services department ,
i have apex 22k in an old works pension in fidelity would it be worth transferring that into the nhs scheme have until june to make my mine up ?.

were wrote: »

Mollycat I am also under section 1995, and as you state this will not relate to Adamc, and we get £year/80 of final salary.

As said, it is one of the best pensions going, but also a few caveats:

There is lots of money tied up in the pension scheme and in my 20+ years with the NHS, has been changed 3 times, usually not for the better. There seem to be a few envious eyes watching it, and they would love to grab the cash. NHS is about the 5th largest employer in the world.

Working age has become longer. Generally speaking from derived pension stats, a man retiring at 60 will on average live about 14 years longer. That same man retiring at 65 has an average of 2.7 years left after retirement. Researchers and academics etc. live longer - the general idea it is the stress that kills you.

Many people do not make it to band 7, 8, 9, some people even get demote in banding. One of my collogues has been demoted twice, thanks to restructuring, and due to this lost value in his pension due to paying in more than his final salary.

As you get older, often ill health sets in. My department at the time only had about 90 people and out of that lot, two in their thirties died of cancer, one in his 50's cancer, and at least 4 people whom I personally know had/has heart issues.

Do not rely on your nhs pension as your only vehicle of income, or pension.

Many leave the NHS, do private work, and the pension gets frozen. Very rarely there is any benefit to transfer it.

~~~~~~~~~~~~~~~~~~~~
adamcarvell, it depends which pay level you stepped in, yearly progression, and what age you retire. I took a quick look and got this, but someone will hopefully come back with a better estimate, or look here https://www.nhsbsa.nhs.uk/member-hub

AfC Band 2 – care support workers, secretaries. Think you will need to have 2 years of service before you can claim.

Year 1 Point 2 £15,404 Pension £285.26
Year 2 Point 2 £15,671 Pension £290.20
Year 3 Point 2 £16,103 Pension £298.20
Year 4 Point 2 £16,536 Pension £306.22
Year 5 Point 2 £16,968 Pension £314.22
Year 6 Point 2 £17,525 Pension £324.54
Year 7 Point 2 £18,158 Pension £336.26
Year 8 Point 2 £18,158 Pension £336.26
Year 9 Point 2 £18,158 Pension £336.26
Year 10 Point 2 £18,158 Pension £336.26

Missing, pay increases, annual inflation, and no higher cost of living increase in this calculation so after working 10 years get £3163.68

Some at work have invested also in housing to supplement the pension.

Some of our high earners have left the pension scheme, investing overseas as this gives them over 20% a year income.

hyubh

were wrote: »

For consultants whom became head of service for the final two years before retiring was a great scheme. Unfunded, or funded there is still cash there.

We're possibly talking at cross purposes. It's a 'great scheme' for the individual member full stop, and being a funded or unfunded scheme is irrelevant to that indeed.

That link did not work for me

Hmm, the forum software 'helpfully' managed to add a space in the middle ('Prote ction'). Hopefully this will work...

http://!!!!!!/2GGxYE9

Pay was only protected for 3 years. Think you had to be 51 or older for that to happen, and both times he was younger.

From the link (PS - it's a current document, so speaks from the POV of the CARE scheme being in place):

Protection of Pay (due to a reduction in pay through no fault of the member)


Eligibility criteria

• You must have at least two years qualifying membership.
• Have suffered a reduction in pensionable pay through no fault of your own.
• You must apply for protection of pay within three months of going onto reduced pay or
marking time.
• You must be a protected member of the 1995 or 2008 Section or have a salary link to 1995/2008 Scheme preserved rights where you have moved over to the 2015 Scheme.

Examples of accepted reasons for Protection of Pay are:
• a change in the nature of the duties performed, for example, due to ill health
• a move to a lower paid post because of pending or actual redundancy
• being transferred to other employment due to reorganization.

Where pay is to ‘mark time’ for a specified period, protection can be requested at the beginning and at the end of the mark time period.