Defined benefits pension growth calculations

GingerJim

Prompted by a Facebook group, I’ve been trying to work out why, when calculating the growth in pension benefits in the NHS pension, is the annual pension multiplied by 16 in order to calculate the growth? What does 16 represent? When looking at the life time allowance one has to multiple the pension by 20.
I’d value any ideas on where 16 and 20 come from and what they are meant to represent; and why they differ.
Thanks for any replies.

Dox

Wrap a wet towel round your head and then google on https://www.nhsbsa.nhs.uk/sites/default/files/2017-07/Process%20for%20calculating%20the%20Annual%20Allowance%20%28V3%29%2007.2017.pdf

Ediit: just tried clicking on that and got 'page not found', so try what I tried - googling on 'NHS pension multiply by 16'

Mr_EDATD

This may be useful

https://www.nhsemployers.org/your-workforce/pay-and-reward/pensions/nhs-pension-scheme/annual-and-lifetime-allowances

I guess the annual allowance calc is more lenient to allow people to build up a decent pension but once you have enough years in to get an annual pension of more than c£50k they say you've got enough so we'll have a bit of tha tax back. Its causing a bit of a problem with senior medical staff that the nhs rely on to run the service cutting back on hours to stay below the LTA.

GingerJim

Thanks both. Yes I've seen most of those documents, but none of them outline where the multipliers 16 and 20 come from, that is really what I am after.

Mr_EDATD

They are both estimates for how long you will be drawing your pension. Presumably based on past statistics and life expectancy. Like i said the LTA is more lenient than the annual allowance (i.e. it assumes you will die sooner - which is a stange sort of leniency :rotfl:)

sandsy

Here you go:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/259732/GAD_report_on_flat_factor_version_14_October.pdf

GingerJim

You are a star; thank you. Have an extra £10k on your annual growth allowance.

sandsy

GingerJim wrote: »

You are a star; thank you. Have an extra £10k on your annual growth allowance.

I'm always up for a Google challenge!