Can Treasury order devalue NHS additional pension ?

Clare43

Hello, I’m looking into getting additional pension and it would be in the 2015 part. My SPA is 68
I looked at the additional pension factsheet on the nhs pension website and have a query about this part  - copied and pasted - 

Additional Pension purchased in the 2015 Scheme is revalued by a Treasury Order each year before the Additional Pension comes into payment and increased in line with CPI inflation whilst it is being paid.

The Treasury Order is the method by which the Treasury notifies the value of the change in prices or earnings to be applied as part of revaluation. The Additional Pension earned in a Scheme year (April to March) is revalued on 1 April of the following and each subsequent Scheme year until you retire.

For example, if the Treasury Order was 2% the value of your earned Additional Pension would increase by 2% at the beginning of the following Scheme year. Additional Pension does not receive the additional 1.5% applied to the standard earned pension. If an Order is negative it will result in the earned Additional Pension being reduced at the beginning of the following year.

so if the order was negative does that means I don’t get my £1000 extra ( for example ) guaranteed extra pension and could get less ?  How likely is this to happen ?   If I get less than the £1000 then it won’t be as good a deal ?  

Currently to get £1000 / year pension would cost me £160.80 a month or £13507.20 in total over 7 years    I’m nearly 48 so have done 7 years to take me to 55 when I plan to take early retirement - have special class status.  I’ve been in the nhs pension since 1991 so have some time in the 1995 section as well.     Any comments appreciated. 

Brynsam

Clare43 said:

For example, if the Treasury Order was 2% the value of your earned Additional Pension would increase by 2% at the beginning of the following Scheme year. Additional Pension does not receive the additional 1.5% applied to the standard earned pension. If an Order is negative it will result in the earned Additional Pension being reduced at the beginning of the following year.

so if the order was negative does that means I don’t get my £1000 extra ( for example ) guaranteed extra pension and could get less ?  How likely is this to happen ?   If I get less than the £1000 then it won’t be as good a deal ?  

Nobody here knows any more than you do how likely it is to happen, given the state the country is (and will continue to be) in economically. The saving grace is likely to be the outcry which would result right across the board if the government did anything so mean spirited to the NHS workers it is rightly deifying now. 

hyubh

Clare43 said:

so if the order was negative does that means I don’t get my £1000 extra ( for example ) guaranteed extra pension and could get less ?  How likely is this to happen ?

In public sector DB land, Pensions Increase has an effective floor of zero, but CARE scheme revaluations do not (despite both usually being CPI based). So the LGPS has already had a negative CARE revaluation due to straight CPI indexation and deflation happening one year (albeit only -0.1%).

That said, I really wouldn't make this the crux of whether to purchase additional pension or not however.

Silvertabby

hyubh said:

Clare43 said:

so if the order was negative does that means I don’t get my £1000 extra ( for example ) guaranteed extra pension and could get less ?  How likely is this to happen ?

In public sector DB land, Pensions Increase has an effective floor of zero, but CARE scheme revaluations do not (despite both usually being CPI based). So the LGPS has already had a negative CARE revaluation due to straight CPI indexation and deflation happening one year (albeit only -0.1%).

That said, I really wouldn't make this the crux of whether to purchase additional pension or not however.

The admin costs of implementing that -0.1% (in the early days of CARE software) were probably more than the actual total reductions.

Thrugelmir

You are guaranteed the buying power of £1,000 in today's monetary terms. Whether CPI rises or is negative makes no difference to you. CPI has fallen once in the past 20 odd years. 

german_keeper

Is the Treasury Order based on annual CPI from the previous September as many other pension related increases seem to be? Or can they just decide the methodology as it suits? 

BobQ

A conservative government raising taxes, increasing the size public sector, shaking the magic money tree, wasting public money though failing to apply competition law and not dismissing out of hand the concept of a wealth tax is itself capable of making public sector pension changes allowed by the scheme.

Andy_L

german_keeper said:

Is the Treasury Order based on annual CPI from the previous September as many other pension related increases seem to be? Or can they just decide the methodology as it suits? 

IIRC, from the CPI/RPI switch  legislation says it has to be increased to reflect inflation. However the methodology chosen would, ultimately, have to stand up in court as a reasonable measure of inflation, eg the switch to the ONS calculated CPI did stand up, plucking a "public sector pension inflation rate" of, say CPI- 0.5% out of the air wouldn't

Technically, the gov could change that law to let them ignore it but the consequences of no-one trusting them on any financial deal going forward (eg Government bonds) would cost them far more than any saving in pensions