NHS Transfer in advice

wannabe_a_saver

Hi there, I'm hoping you can help me to understand this situation as like a lot of NHS employees I've never really given my pension much thought, sadly. 

I started working for the NHS in 2010, then later took just over 3 years working for a private provider, then returned to the NHS early last year.  So I have a few years in the 2008 scheme, a few years in an Aviva pension, and am now on the 2015 scheme and expect to be most likely until I retire (at 68!!)
My Aviva pension had a transfer value of 11,602.57.  The offer that has come back from NHS Pensions from my application to transfer in is written as follows:

Pensionable earnings credit: 44,466.91
Club earned pension credit: 0
Scheme year ending: 31/3/20
Pensionable membership: 3 years 32 days

Does this mean that the NHS will treat my pension as if I were working for them the entire time I was away?  As the 3 years 32 days sounds about right for that, but then the earnings credit is much lower, less than 18 months equivalent.  The letter I have received doesn't actually explain what any of this means just asks me to sign and return a form if I accept their offer.  I would be really grateful for any help! 

Dazed_and_C0nfused

According to the relevant NHS pension booklet

The transfer will buy you a pensionable earnings credit in this Scheme. This credit will normally be added to your first Scheme year’s pensionable earnings and used to calculate the amount of pension built up in that year.

And

Non Club transfers into the 2015 Scheme 
The credit resulting from a non-Club transfer into the 2015 Pension Scheme is an additional pensionable earnings credit in the year in which the transfer occurs.
How is the pensionable earnings credit calculated?
The transfer value from your previous pension scheme is multiplied by 54 and the total amount divided by the factor supplied by our Actuaries which is dependent on the member’s age, and their Normal Pension Age (NPA).
You earn a pension of 1/54th of the pensionable earnings credit. This pension is increased each year by inflation, known as Treasury Orders.

wannabe_a_saver

Any chance you could translate it into plain English for me?  

woolly_wombat

My my understanding is that you must apply to transfer a pension into the 2015 scheme within 12 months of becoming eligible to join.

Does that apply to you?

If so then get your skates on to obtain a quote for what your Aviva pension transfer would purchase in NHS pension.

wannabe_a_saver

woolly_wombat said:

My my understanding is that you must apply to transfer a pension into the 2015 scheme within 12 months of becoming eligible to join.

Does that apply to you?

If so then get your skates on to obtain a quote for what your Aviva pension transfer would purchase in NHS pension.

I have already applied, the letter I outlined above is the offer letter from NHS Pensions. 

hugheskevi

I interpret that to mean that if you were to transfer the pension into the NHS pension scheme:

• The earnings credit of £44,467 is added to your pensionable earnings in first year of scheme
• This results in extra pension of £44,467 / 54 = £823 p/a of pension in financial year 2019/20, payable from your State Pension age
• It appears that unlike main scheme pension that £823/ p/a increases only by CPI each year (main scheme pension increases each year by CPI+1.5% whilst you are an active member)
  

wannabe_a_saver

hugheskevi said:

I interpret that to mean that if you were to transfer the pension into the NHS pension scheme:

• The earnings credit of £44,467 is added to your pensionable earnings in first year of scheme
• This results in extra pension of £44,467 / 54 = £823 p/a of pension in financial year 2019/20, payable from your State Pension age
• It appears that unlike main scheme pension that £823/ p/a increases only by CPI each year (main scheme pension increases each year by CPI+1.5% whilst you are an active member)
  

Ok thank you, so if I accept this transfer offer then my 3 years of contributions to Aviva will get me, on retirement, 1/54th of 44,467 adjusted for CPI?  Does that seem like a good deal do you think?  

Its so hard to get your head around this!

hugheskevi

The key comparison is the £11,602.57 DC pot against the pension credit you get. Applying the April 2020 pension increase of 1.7%, the amount of annual pension you would get seems to be £837.46 p/a from age 68 (with CPI increases from April 2021, the first increase being 0.5%). That is a multiplier of 13.85.

How good that is depends on your age - if you were 65 it was be amazing. From other details given, you are probably in your 30s. I'd say it was still good, especially as you can build up DC pension anytime, whereas DB is largely limited to public sector now.

You could see how much Added Pension would cost to get a pension of £837 using the Added Pension calculator as a comparison.

OldBeanz

wannabe_a_saver said:

hugheskevi said:

I interpret that to mean that if you were to transfer the pension into the NHS pension scheme:

• The earnings credit of £44,467 is added to your pensionable earnings in first year of scheme
• This results in extra pension of £44,467 / 54 = £823 p/a of pension in financial year 2019/20, payable from your State Pension age
• It appears that unlike main scheme pension that £823/ p/a increases only by CPI each year (main scheme pension increases each year by CPI+1.5% whilst you are an active member)
  

Ok thank you, so if I accept this transfer offer then my 3 years of contributions to Aviva will get me, on retirement, 1/54th of 44,467 adjusted for CPI?  Does that seem like a good deal do you think?  

Its so hard to get your head around this!

An inflation linked annuity of £116,000 with 50%widows benefits would pay about £4k per annum and you are being offered £823pa for £11,600, is one way of looking at this. 

wannabe_a_saver

hugheskevi said:

The key comparison is the £11,602.57 DC pot against the pension credit you get. Applying the April 2020 pension increase of 1.7%, the amount of annual pension you would get seems to be £837.46 p/a from age 68 (with CPI increases from April 2021, the first increase being 0.5%). That is a multiplier of 13.85.

How good that is depends on your age - if you were 65 it was be amazing. From other details given, you are probably in your 30s. I'd say it was still good, especially as you can build up DC pension anytime, whereas DB is largely limited to public sector now.

Thank you, I'm 36.  So the NHS pension is DC?  Would you accept the offer and transfer in?

wannabe_a_saver

OldBeanz said:

wannabe_a_saver said:

hugheskevi said:

I interpret that to mean that if you were to transfer the pension into the NHS pension scheme:

• The earnings credit of £44,467 is added to your pensionable earnings in first year of scheme
• This results in extra pension of £44,467 / 54 = £823 p/a of pension in financial year 2019/20, payable from your State Pension age
• It appears that unlike main scheme pension that £823/ p/a increases only by CPI each year (main scheme pension increases each year by CPI+1.5% whilst you are an active member)
  

Ok thank you, so if I accept this transfer offer then my 3 years of contributions to Aviva will get me, on retirement, 1/54th of 44,467 adjusted for CPI?  Does that seem like a good deal do you think?  

Its so hard to get your head around this!

An inflation linked annuity of £116,000 with 50%widows benefits would pay about £4k per annum and you are being offered £823pa for £11,600, is one way of looking at this. 

Its one way of looking it that I don't remotely understand unfortunately! 

We should have had a class on understanding NHS pensions before qualifying!