Covid, NHS 95 Pension and McCloud.

HardyOrchid

I thought I had everything sorted regarding my pension provision but this year has thrown a few curve balls to say the least so looking for some advice if possible.
I'm 53 and work for the NHS, entirely in the '95 Pension scheme, have special class status and, up until the McCloud judgement, was protected from being forced into the 2015 scheme. I had intended to work at least until I was 58, at which point my OH's pension would become payable. We would make a decision on retirement at that point.

Covid19 and the McCloud has changed my financial position significantly.
Firstly the hospital has a policy of 'no overtime'. The most anyone can normally work on a substantive contract is full time, any extra above full time must be done as bank work on a separate bank contract and therefore do not count towards pension entitlement. Due to Covid19 this policy was abandoned, in trying to keep staffing levels high overtime was available so I've been working 60+ hour weeks since April.
Secondly, the McCloud judgement means I can no longer add any years to my '95 entitlement from April 2022. 

By a twist of fate I turn 55 in April 2022 so I could actually retire at that point. If I did retire in April 2022 my pension could be based upon my salary from April 2020 onward, which,due to the overtime, would result in a much increased pension compared to my normal salary. Even though I don't want to retire at that point I think I have to take it then as not doing so results in a double whammy. The increased salary from April 2020 will eventually fall outside of the three qualifying years and any extra years worked will only be added to the 2015 scheme rather than the '95.

Based upon all that I will draw the '95 pension and 'Retire' in April 2022 but I don't actually want to stop working. I know abatement can/will apply if I earn too much  If that means I have to only work a couple of days a week so be it but I'd rather work more, just not for free. So,  does anyone know if you can reduce your salary with things like the NHS salary sacrifice scheme such as car leasing or contributions the the NHS AVC scheme and avoid/reduce abatement, or, does it go off your top line earnings before those deductions no matter what?  Alternatively is there anything someone can suggest that I've overlooked?

In a strange way two negatives, Covid19 and McCloud, have combined to probably put me in a much better position financially than I would otherwise have been and I almost feel guilty because of that, bearing in mind all the worries that a lot of people have at this time. But I'm just trying to look after myself financially going forward.
If anyone has any suggestions about something I've missed or can help regarding the abatement question I would be grateful to hear.

TIA. 

hyubh

HardyOrchid said:

the McCloud judgement means I can no longer add any years to my '95 entitlement from April 2022. 

This is incorrect. McCloud ruled illegal the age discrimination in saying, someone within 10 years of their normal pension age in 2012 should keep final salary accrual for the period between the introduction of the CARE scheme to NPA, whereas a younger person active in 2012 then into 2015 does not.

By a twist of fate I turn 55 in April 2022 so I could actually retire at that point.

Is this your normal pension age, or merely the earliest you can draw your pension? If the latter, McCloud can only benefit you - you will have the choice of 1995 or 2015 section accrual.

 If I did retire in April 2022 my pension could be based upon my salary from April 2020 onward, which,due to the overtime, would result in a much increased pension compared to my normal salary. 

Pensionable pay in the NHS pension scheme excludes overtime, defined as hours paid in excess of full time working. This is so even in the CARE scheme however, so unaffected by McCloud.

In a strange way two negatives, Covid19 and McCloud

McCloud is a negative only to private sector taxpayers who actually fund the largess involved...

spaniel101

I am not sure you would be 'allowed' to rejoin the nhs pension scheme (which would be 2015) after retire and return, specifically having drawn your 1995 section (unless you were deferred - unlinked for 5 or more years).   Neither can I see Salary Sacrifice being of any help, given abatement is a more complex calculation based on your new earnings each year + pension, etc, etc.  

"1995 Section – pensions subject to the previous abatement formula.   Some current and former members are still subject to the previous formula, which is the pension plus new earnings must not exceed the earnings prior to retirement. They are:  Special classes - the review considered the position of the special classes and concluded that those who were eligible should retain the right to retire with unreduced benefits from age 55. Therefore, where abatement applies to a member of the special classes taking age retirement before reaching age 60, it will continue to be assessed under the previous formula, irrespective of the date on which pensionable employment ended".    If their new earnings on re employment and their pension exceeded their earnings prior to their retirement, their pension would be abated £1 for £1 until age 60. The pre-retirement earnings are subject to cost of living increases where applicable each year" 

Most people I have come across in your position, either opt to significantly downgrade (for a much less stressful working life and / or part time) or leave and work elsewhere in health / social care for an alternative provider.   ...or of course hang on until 60 (when abatement would cease).

You may find this a helpful read;
https://www.nhsbsa.nhs.uk/sites/default/files/2019-05/Abatement basic overview-20190516-(V2) .pdf

Flugelhorn

The pension is based on the full time equivalent salary, not the actual pay 

dimbo61

If you can retire at 55 ? and take your NHS pension depending on your job and qualifications you might be able to return to work for the NHS on a bank contract ( This is what I am doing ) 
I have also joined the auto enrollment pension while getting my NHS pension.
I pay 4% employer pay 3% and 1% Tax relief upto £4,000 a year as your now taking your NHS pension.
Can you check on your employer,s website if they offer Retire and Return policy ! so you have a part time contact and better T&C,s ?
I also took the largest lump sum and smaller pension as I would have to claim my pension for 12+ years to be better off by which time I would also get my state pension ( So more tax on pension income )

spaniel101

"I pay 4% employer pay 3% and 1% Tax relief upto £4,000 a year as your now taking your NHS pension".

Defined Benefit arrangements;     If you receive a scheme pension from any Defined Benefit arrangement (i.e. NHS 1995/2008), this will not trigger the MPAA (£4000 contribution limit), allowing you to continue making contributions up to 100% of Gross Earned Income to a Defined Contribution arrangement (inc. tax relief).     Alternatively, if you have zero earned income, you are limited to contributions of £3600 (£2880 + tax relief).

dinglebert

dimbo61 said:

If you can retire at 55 ? and take your NHS pension depending on your job and qualifications you might be able to return to work for the NHS on a bank contract ( This is what I am doing ) 
I have also joined the auto enrollment pension while getting my NHS pension.
I pay 4% employer pay 3% and 1% Tax relief upto £4,000 a year as your now taking your NHS pension.
Can you check on your employer,s website if they offer Retire and Return policy ! so you have a part time contact and better T&C,s ?
I also took the largest lump sum and smaller pension as I would have to claim my pension for 12+ years to be better off by which time I would also get my state pension ( So more tax on pension income )

I retired at 55 with MHO status and went back two days later working 16 hours which was the maximum allowed as you were not allowed to earn more than you did before until 60th birthday.  However I was not allowed to join pension again.  Odd that you were.  Mine was the pre 95 scheme were it was common for staff to do a year of night duty just before retiring in order to boost pension.

spaniel101

I think 'dimbo61' possibly means he joined the "bank contract auto enrolment pension" i.e. Nest or similar, with whoever the bank contract was with (i.e. not NHS) but im sure he'll be along to clarify.

Mistermeaner

dinglebert said:

dimbo61 said:

 were it was common for staff to do a year of night duty just before retiring in order to boost pension.

Clap for the NHS

dimbo61

Well it was common for me to work regular nights for 30 + years and got to hate them.
Now dealing with Covid19 on a bank contract so No sick pay and No death in service payment.
Yes the government said they would pay 2 weeks sick pay if you have to isolate and also £60,000 if you work for the NHS and die from Covid19 but not too keen for oh trying to get that after attending my funeral.
Yes it's the NEST pension.
I have already taken a small private pension so £4,000 limit applies.

Dox

dimbo61 said:

I have already taken a small private pension so £4,000 limit applies.

For the benefit of anyone else reading the thread (and possibly dimbo - who knows?!), the £4,000 limit only applies where someone 'flexibly accesses' a defined contribution scheme and takes any amount, however small, in excess of the tax free 25%. The limit does not apply if you take 25% tax free cash and use the remainder to buy an annuity; nor does it apply if you take the whole of your pension on the basis it is a 'small pot' (no more than £10,000).