NHS Pension 2015 Scheme and Part Time Work

foxfire

I’m a member of the NHS Pension 2015 Scheme and I’m looking to find out the impact reducing my hours would have on my pension.  There’s an earlier thread on this topic from 2014 but this is related to the 1995/2008 Schemes and I understand the 2015 Scheme is different in this regard.

The official literature for the 2015 Scheme states “Your annual pension is equal to one-fifty fourth of your pensionable earnings for each Scheme year or part year of membership.”

So my understanding is that I should use my annual part-time pre-tax salary in the calculation (not my WTE/FTE salary). And that for the purpose of the calculation, one year of part-time work is equivalent to one year of full-time work. So my calculation would be:

Annual pension = part-time pre-tax salary / 54 x number of years worked part-time

(for simplicity let’s just assume my pensionable earnings are constant throughout my career)

Is this correct?

If so this appears to differ from the 1995/2008 Scheme which uses FTE/WTE salary but a reduced number of years to reflect the actual part time worked.

Dazed_and_C0nfused

Isn't the end result effectively the same though?

Thrugelmir

1995 scheme was highest salary in last 3 years worked. Dropping to PT has to be managed. 

hyubh

Thrugelmir said:

1995 scheme was highest salary in last 3 years worked. Dropping to PT has to be managed. 

In what way, when the calculations are all on whole time equivalent pay...?

hyubh

foxfire said:

If so this appears to differ from the 1995/2008 Scheme which uses FTE/WTE salary but a reduced number of years to reflect the actual part time worked.

When the pay that determines the value of past service is only determined on leaving (-> 1995 and 2008 schemes), it very much matters if whole time equivalent pay and pro-rated service, or alternatively, actual pay and calendar service is used. Imagine someone who worked full time for 20 years then dropped down to 50% part time in the final year - basing on actual pay would decimate the value of the first 20 years compared to if this person had left active membership a year earlier than she actually did. When accrual is CARE not final salary however, that concern falls away, as the pay that determines the value of a given year's service is from that same year.

foxfire

Hi. Thanks for your responses. So I gather my understanding of how to work out my pension on the 2015 Scheme if I went part time is correct as no one has said otherwise:

Annual pension = part-time pre-tax salary / 54 x number of years worked part-time

Please let me know if not!

In terms of the comparison with the 1995/2008 Scheme I wasn’t inferring that one was better than the other (in terms of how they treat part time workers) I was just getting my head around the difference. 

hugheskevi

foxfire said:

So I gather my understanding of how to work out my pension on the 2015 Scheme if I went part time is correct as no one has said otherwise:

Annual pension = part-time pre-tax salary / 54 x number of years worked part-time

Please let me know if not!

You also need to factor in the enhanced in-service revaluation of CPI+1.5%.

foxfire

hugheskevi said:

foxfire said:

So I gather my understanding of how to work out my pension on the 2015 Scheme if I went part time is correct as no one has said otherwise:

Annual pension = part-time pre-tax salary / 54 x number of years worked part-time

Please let me know if not!

You also need to factor in the enhanced in-service revaluation of CPI+1.5%.

Yes aware if that thanks!

oxfordowl1

foxfire said:

Hi. Thanks for your responses. So I gather my understanding of how to work out my pension on the 2015 Scheme if I went part time is correct as no one has said otherwise:

Annual pension = part-time pre-tax salary / 54 x number of years worked part-time

Please let me know if not! 

Hi Foxfire, to give the dreaded Sir Humphrey response - yes and no!

You are correct that the 2015 scheme uses the actual pre-tax salary paid rather that the notional FTE (full time equivalent) salary. However, whilst the 1995 and 2008 schemes have a single calculation upon retirement, this is not the case for the 2015 scheme. You may already know this in which case I apologise for replying unnecessarily. For the 2015 scheme the calculation is done each year. To take a made up example:

Year 1: earned £20,000 (half time hours on a £40,000 full time salary)
Year 2: earned £20,000 (half time hours on a £40,000 full time salary)
Year 3: earned £10,000 (half time hours on a £40,000 full time salary, but 6 months unpaid leave to care for a relative)
Year 4: earned £50,000 (half time on a £100,000 full time salary after promotion to head of the hospital).

Ignoring annual revaluation for inflation, these four years would give an annual pension of:
( £20,000 / 54 ) + ( £20,000 / 54 ) + ( £10,000 / 54 ) + ( £50,000 / 54 ) = £370 + £370 + £185 + £926 = £1851

So rather than multiplying the number of years worked as per your calculation, each year is added up. Your calculation would be:
( £50000 / 54 ) * 4 which gives the wrong answer of £3704.

Where salary and working hours are entirely unchanged (which is unlikely) the two answers may be the same (ignoring revaluation) but that is a coincidence.

I hope this helps.

PS: IIRC one reason for introducing the 2015 scheme was to prevent the pension earned during a whole career being paid on a particularly high salary at the end of a career.

foxfire

oxfordowl1 - this is so incredibly helpful!!! I cannot thank you enough!!!
PS Thanks for the promotion