NHS pension statements

dory263

Hi All,
I have been a member of the NHS pension since August 2011, so I am partly under the 2008 scheme for several years and now under the 2015 scheme.
I am having a lot of trouble understanding my statement on TRS, and the whole pension scheme in general. I have tried calling them to see if someone can shed some light but to no avail. 

Does anyone have any idea how the pension is calculated or where I can get a rough estimate for how much is sitting in my pot?
Happy to provide rough figures for annual payments etc
Thanks

Dox

There isn't a 'pot', which could be where part of your confusion is stemming from. The 'pot' concept relates to 'defined contribution' (aka money purchase) schemes, which are effectively tax-efficient piggy banks where your retirement income is based on how much is in the 'pot' when you come to draw your benefits.

The NHS scheme is a defined benefit scheme, where what you receive at retirement is based on the rules of the scheme. It is one of the best schemes in the country, so fits into that rare category of DO invest in something even if you don't understand it!

There are several explanations on line. See if https://www.which.co.uk/money/pensions-and-retirement/company-pensions/public-sector-pensions-explained/nhs-pension-schemes-explained-azydt0q5t434 or https://www.unison.org.uk/get-help/knowledge/pensions/nhs-pension-scheme/ help at all.

Dazed_and_C0nfused

There is no "pot" with the standard 2008 or 2015 NHS schemes.

You are building up a guaranteed payment at retirement age not a pension fund as such.

The 2015 scheme seems to accrue 1.85% of your pensionable earnings as a pension.

So if that was say £20,000 you would accrue a pension of £370/year.  That would probably have some inflation linked element so it would increase a little each year but essentially when you reached State Pension age you would get a pension of £370 from that year.  And it would be paid each year for the rest of your life.

PennyForThem_2

OK
So you are still on NHS staff?  You should be able to access ESR where you electronically book your time off etc?  There is a tab on that app that will give you benefits of which your pension 'amount accrued' 'probable value per year' 'selloff value' is given.  

I am retired since Sept 2019 so cannot access it but suggest you get into it and look..... Remember that it is12months behind i.e. it gives the previous financial year.  It is useful.  I would really, really advocate paying extra into NHS pension if you can afford it especially if you haven't been an NHS staff member since leaving UNI/school.  It is gold standard.

dory263

Dazed_and_C0nfused said:

There is no "pot" with the standard 2008 or 2015 NHS schemes.

You are building up a guaranteed payment at retirement age not a pension fund as such.

The 2015 scheme seems to accrue 1.85% of your pensionable earnings as a pension.

So if that was say £20,000 you would accrue a pension of £370/year.  That would probably have some inflation linked element so it would increase a little each year but essentially when you reached State Pension age you would get a pension of £370 from that year.  And it would be paid each year for the rest of your life.

I guess my confusion comes from the fact that I pay approx £160 a month into the pension scheme. One assumes that this, as well as the employer contributions at 14% , is then sitting in a “pot” until I reach retirement age. Is this not the case? 

Where is my money going to, if not to sit gathering dust in an account somewhere for me to claim it back when I’m older? 

JoeCrystal

dory263 said:

I guess my confusion comes from the fact that I pay approx £160 a month into the pension scheme. One assumes that this, as well as the employer contributions at 14% , is then sitting in a “pot” until I reach retirement age. Is this not the case? 

Where is my money going to, if not to sit gathering dust in an account somewhere for me to claim it back when I’m older? 

The nature of the NHS pension scheme is that it is unfunded, defined benefit occupational pension scheme backed by HM Treasury. You really should read about your pension scheme to clear up any misunderstanding. Your money goes directly to the NHS pensioners with any surplus money goes back to HM Treasury. If there is any shortfall, then HM Treasury will cover the shortfall.

dory263

JoeCrystal said:

dory263 said:

I guess my confusion comes from the fact that I pay approx £160 a month into the pension scheme. One assumes that this, as well as the employer contributions at 14% , is then sitting in a “pot” until I reach retirement age. Is this not the case? 

Where is my money going to, if not to sit gathering dust in an account somewhere for me to claim it back when I’m older? 

The nature of the NHS pension scheme is that it is unfunded, defined benefit occupational pension scheme backed by HM Treasury. You really should read about your pension scheme to clear up any misunderstanding. Your money goes directly to the NHS pensioners with any surplus money goes back to HM Treasury. If there is any shortfall, then HM Treasury will cover the shortfall.

That’s just it.. I’ve read the lovely booklet they give you when you sign up and it just doesn’t make any sense at all. I’ve read it numerous times and still am no closer to understanding where my money goes or what I’m entitled to when I retire. When I try to speak to someone on the phone, no one seems to be able to understand it enough to explain it to me either. 

So at the moment, I’m debating if it’s even worth it. I appreciate that everyone says it’s one of the best pensions.. but if there is no simple answer and no one can tell me how it even works, then how on Earth can it be the best if no one understands it?!

ggmf

As you have been advised it is not a 'pot', it is very much worth it, have you obtained a TRS?

kuratowski

The pension is giving you a guaranteed income for life.  The contributions you pay are simply your membership fee for being a part of the scheme.  What you are getting back is a defined level of income until you die.  For every year you work you get x% of that year's salary, inflation adjusted, to be received every year between normal pension age and your death.  So, if you work for 40 years or so, this pension will replace a large part of your salary, for the rest of your life.  This is guaranteed by the government.

By contrast, in most other pension schemes, the money you pay in does go into an individual pot, and figuring out how much income you will get back involves wild guesswork, as it is dependent on asset allocation, financial market returns over decades, the level of fees paid to the provider, and the prevailing interest rates, plus of course the unknown future rules on pension access arrangements.

JoeCrystal

dory263 said:

That’s just it.. I’ve read the lovely booklet they give you when you sign up and it just doesn’t make any sense at all. I’ve read it numerous times and still am no closer to understanding where my money goes or what I’m entitled to when I retire. When I try to speak to someone on the phone, no one seems to be able to understand it enough to explain it to me either. 

So at the moment, I’m debating if it’s even worth it. I appreciate that everyone says it’s one of the best pensions.. but if there is no simple answer and no one can tell me how it even works, then how on Earth can it be the best if no one understands it?!

Ummm, it is really that simple. You are buying an index-linked pension with your contribution. The reason why it is so valuable is that you are paying peanuts for such generous benefits. You know exactly what you are getting when you reach your SPA and ultimately backed by the taxpayers. Dazed_and_C0nfused already explained how it works with the percentage of your earnings as your pension that you build up. The equivalent cost in a DC pension scheme is almost four to five times what you are paying.

crv1963

dory263 said:

JoeCrystal said:

dory263 said:

I guess my confusion comes from the fact that I pay approx £160 a month into the pension scheme. One assumes that this, as well as the employer contributions at 14% , is then sitting in a “pot” until I reach retirement age. Is this not the case? 

Where is my money going to, if not to sit gathering dust in an account somewhere for me to claim it back when I’m older? 

The nature of the NHS pension scheme is that it is unfunded, defined benefit occupational pension scheme backed by HM Treasury. You really should read about your pension scheme to clear up any misunderstanding. Your money goes directly to the NHS pensioners with any surplus money goes back to HM Treasury. If there is any shortfall, then HM Treasury will cover the shortfall.

That’s just it.. I’ve read the lovely booklet they give you when you sign up and it just doesn’t make any sense at all. I’ve read it numerous times and still am no closer to understanding where my money goes or what I’m entitled to when I retire. When I try to speak to someone on the phone, no one seems to be able to understand it enough to explain it to me either. 

So at the moment, I’m debating if it’s even worth it. I appreciate that everyone says it’s one of the best pensions.. but if there is no simple answer and no one can tell me how it even works, then how on Earth can it be the best if no one understands it?!

It is simple as has been explained by others. You pay a percentage of your income now for a promise of an income inflation proofed for life on retirement. 

An analogy- your pension is a book, every year you add another chapter to the book. When you reach retirement you have many chapters in the book, you have not lost the previous chapters but own the whole book. So you accrue a promise in year 1 for x amount of your salary at retirement for life, plus year 2,3,4 and so on. They are all paid to you monthly in arrears.

You really would be unwise to opt out just because you don't understand/ grasp the mechanics of how it operates. I have just retired (and then returned but that's another story), I will receive 15k pa for life (however long that may or may not be) and on my demise my wife will receive 9.2k pa for the rest of her life. All for a cost of 9.3% of my salary, had I not been subject to a pension sharing order it would have been even higher. There is no way that I could have managed that sort of income by saving into a private pension. I don't know how the mechanics of lots of things work but I still have domestic appliances!

The way it is often described is the pension is deferred salary, you give up some now for a promise of a payday forever! 

Edit, so your contribution helps pay my pension now, on the promise future contributors will pay yours and if there aren't enough contributions the Treasury will step in and pay the shortfall. That's how the unfunded scheme works.