NHS Pension Query

RolandFlagg

This is for my partner. Sorry if some of the details are a bit vague.
She has 25 years in a NHS Pension, although they are now in two different types due to a rule change in 2015. She thinks the first type which she had for the first 19 years she can take at 60 (shes 51 now), and the newer type at 67. But she's not sure.
But between now and her getting to 60 she would like to drop a day, possibly two, but she's concerned on how that would affect her pension.
Would it make a big difference? Could someone please explain what dropping one to two days before retirement would mean to the pension pot(s)?
Thanks.

Andy_L

As this is a defined benifit pension there is no pot, only a promise to pay a certain amount of pension.

The old scheme will be unaffected - the Final Salary used is the full-time equivalent salar,y you just accumulate years of service at the part-time rate (which isn't an issue for her as you can't accumulate more years of service in the old scheme)

Pension already accrued in the new scheme will be unaffected. Any service going forward would accrue pension based on her part-time salary 

kaMelo

The short answer is her pension would be worth less as accrual rates and pensionable pay used to calculate pension entitlement would be based upon part time.
It it true that the years accrued under the old pension are safe however the part time salary will have an impact as pensionable pay used to calculate pension entitlement would be based upon a part time salary (under either 95 or 2008 scheme) You could offset that somewhat by going full time for the qualifying period defined in each pension scheme.

The 2015 scheme would reduce her pension without exception as it's career average and every year counts.

A rough example calculation purely on the 2015 scheme (not including inflation revaluation)..
A salary of £32,000 going from full time to 4/5 part time for the next ten years would result in a pension reduction of nearly £1500 in year one and growing every year once inflation is added.

Edited to correct my misunderstandings.

Emmia

Is she aware of how she may affected by the outcome of the consultation on the McCloud judgement?

https://www.nhsbsa.nhs.uk/february-2021-update-government-changes-public-service-pension-schemes

zemarcopolo

In 2015 scheme,  every year the pension grows by 1/54 of the NHS pensionable income. 

For example,  if her pensionable salary was £50,000, she would have annual accrual of 1/54 x 50,000 = £926.

If working part-time reduces her salary to, say £40,000. Her annual pension will then be £741. Therefore, she will lose  £185 annually (plus it's variance growth).

Andy_L

kaMelo said:

The short answer is her pension would be worth less as accrual rates and pensionable pay used to calculate pension entitlement would be based upon a part time salary. 
It it true that the years accrued under the old pension are safe however the part time salary will have an impact as pensionable pay used to calculate pension entitlement would be based upon a part time salary (under either 95 or 2008 scheme) You could offset that somewhat by going full time for the qualifying period defined in each pension scheme.

The 2015 scheme would reduce her pension without exception as it's career average and every year counts.

A rough example calculation purely on the 2015 scheme (not including inflation revaluation)..
A salary of £32,000 going from full time to 4/5 part time for the next ten years would result in a pension reduction of nearly £1500 in year one and growing every year once inflation is added.

No it isn't. Pensionable pay is based on the full-time equivalent for the 95 & 08 schemes:

"In order to ensure equitable benefits for all members ... the two elements used for all pension transactions, the membership and pensionable pay will be used at their whole time equivalents. For instance, if someone has worked part time for, say 50% of the standard full time hours, for 20 years they will have 10 years membership counting towards their benefit calculations. The other main factor is that for the calculation of benefits the pensionable pay is based on the fulltime equivalent pay for that job. This is known as a ‘notional whole time TPP’."

'95 scheme link, but it is the same in the '08

https://www.nhsbsa.nhs.uk/sites/default/files/2017-03/Notional Whole Time TPP V3 06.13.pdf

kaMelo

Andy_L said:

kaMelo said:

The short answer is her pension would be worth less as accrual rates and pensionable pay used to calculate pension entitlement would be based upon a part time salary. 
It it true that the years accrued under the old pension are safe however the part time salary will have an impact as pensionable pay used to calculate pension entitlement would be based upon a part time salary (under either 95 or 2008 scheme) You could offset that somewhat by going full time for the qualifying period defined in each pension scheme.

The 2015 scheme would reduce her pension without exception as it's career average and every year counts.

A rough example calculation purely on the 2015 scheme (not including inflation revaluation)..
A salary of £32,000 going from full time to 4/5 part time for the next ten years would result in a pension reduction of nearly £1500 in year one and growing every year once inflation is added.

No it isn't. Pensionable pay is based on the full-time equivalent for the 95 & 08 schemes:

"In order to ensure equitable benefits for all members ... the two elements used for all pension transactions, the membership and pensionable pay will be used at their whole time equivalents. For instance, if someone has worked part time for, say 50% of the standard full time hours, for 20 years they will have 10 years membership counting towards their benefit calculations. The other main factor is that for the calculation of benefits the pensionable pay is based on the fulltime equivalent pay for that job. This is known as a ‘notional whole time TPP’."

'95 scheme link, but it is the same in the '08

https://www.nhsbsa.nhs.uk/sites/default/files/2017-03/Notional Whole Time TPP V3 06.13.pdf

I take my statement back as it was wrong (or half wrong anyway) the only hit to your pension by working part time is accrual rate. There is no hit on pensionable pay used in the calculation. 
A generous pension scheme is even more generous than I thought, no wonder they shut it down to new members so long ago..

hyubh

kaMelo said:

I take my statement back as it was wrong (or half wrong anyway) the only hit to your pension by working part time is accrual rate. There is no hit on pensionable pay used in the calculation. 
A generous pension scheme is even more generous than I thought, no wonder they shut it down to new members so long ago..

Pensionable pay for final salary benefits being whole time equivalent doesn't really make it more generous, as part time periods of service are (were) pro-rated. So a member who had mostly worked part time historically going full time at the end wouldn't get a sudden boost to their pension.

Conversely, in the CARE scheme, there's a better accrual rate (i.e. fraction of pensionable pay that helps define the pension), and for active members, above inflation revaluation. So a member in a low-grade job who doesn't get any big promotions over the course of their membership will likely do better in the CARE scheme compared to the old final salary one (although admittedly, the old 'special class' status for certain 1995 section members retiring at 55 without reductions was a biggie).

Johnnyboy11

Worth mentioning you can retire from age 50 in the '95 scheme, albeit with a reduced pension that isn't index linked until age 55.

kaMelo

hyubh said:

kaMelo said:

I take my statement back as it was wrong (or half wrong anyway) the only hit to your pension by working part time is accrual rate. There is no hit on pensionable pay used in the calculation. 
A generous pension scheme is even more generous than I thought, no wonder they shut it down to new members so long ago..

Pensionable pay for final salary benefits being whole time equivalent doesn't really make it more generous, as part time periods of service are (were) pro-rated. So a member who had mostly worked part time historically going full time at the end wouldn't get a sudden boost to their pension.

Conversely, in the CARE scheme, there's a better accrual rate (i.e. fraction of pensionable pay that helps define the pension), and for active members, above inflation revaluation. So a member in a low-grade job who doesn't get any big promotions over the course of their membership will likely do better in the CARE scheme compared to the old final salary one (although admittedly, the old 'special class' status for certain 1995 section members retiring at 55 without reductions was a biggie).

The 95 scheme really is generous, pensionable pay can be boosted at the appropriate time and the special class status is the cherry on top.
The subsequent 2008/15 schemes can and do beat it but you need to work much much longer to achieve this. If you hold special class status this could mean having to work a decade longer.

hyubh

kaMelo said:

The 95 scheme really is generous, pensionable pay can be boosted at the appropriate time

Not sure what you're alluding to... final pensionable pay in the 1995 section is best of the last three years.

The subsequent 2008/15 schemes can and do beat it but you need to work much much longer to achieve this.

Given the accrual rates of the later sections were/are much better, that's not obviously true.