Taking NHS Pension early - Actuarilly Reduction vs "potential" CPI Increase.

purplelady99

One thing I didnt mention was that I reduced my hours to approx 50% of full time around 12 months ago so am not sure if my last 12 months pensionable pay is going to be higher than my 2020/21 pensionable pay (which was the just over £60k figure I initially quoted).

Your service is compressed not your salary when calculating pensionable pay so your wte salary for 2021/22 will be higher than 2020/21 as everyone working in the nhs received a pay award on 1/04/22 (it was around 3%). 

Korkyb

Bobinyorkshire said:

Out of curiosity, did you look at the ‘step down’ option of the NHS pension? I took a lower grade job at the same NHS Trust and was able to ‘mark time’ and protect my pension at the higher salary for the years I had done up until the step down started.

It is something I considered but really am looking at reducing my hours down to around 6 or 12 per week in around 12 / 18 months so in effect I guess its early retirement.

Because of that I'll need to take my pension earlier & take the hit of actuarilly reduction.

spaniel101

Thrugelmir said:

Korkyb said:

My question is: Given that the NHS pension annual increase is based on the CPI would I be better / just as well to take the pension now / ASAP.

1995 scheme also increases annually by a factor of 1.5% prior to retirement. Doesn't sound much however compounding over the years mounts up. 

My understanding is that 1995 Final Salary 'Officers' is straight Final Salary, best of last 3, but there is also a 1995 +1.5% 'dynamised factor' applied to some 'Practitioners', GPs/etc (between Primary / Secondary Care), or something alike.   I am sure someone will clarify my vague description!      

Korkyb

purplelady99 said:

One thing I didnt mention was that I reduced my hours to approx 50% of full time around 12 months ago so am not sure if my last 12 months pensionable pay is going to be higher than my 2020/21 pensionable pay (which was the just over £60k figure I initially quoted).

Your service is compressed not your salary when calculating pensionable pay so your wte salary for 2021/22 will be higher than 2020/21 as everyone working in the nhs received a pay award on 1/04/22 (it was around 3%). 

I know that my base salary is counted as WTE when calculating my pension.

What I'm less sure about is how unsocial hours fits into the calculation?

My job involves a lot (an awful lot) of unsocial hours (unusual at my band) and around 25% of the £60k salary I earned in 20/21 was actually made up of unsocial hours allowance.

Now that I've gone part time an even greater proportion of my working hours attract unsocial hours payment than when I worked full time.

I've been unable to get a straight answer from anyone as to how the increase in the proportion of unsocial hours but reduction in hours overall will be calculated when it comes to my pension.

If the unsocial hours are also extrapolated pro rata then it means that reducing my hours will have had the effect of increasing my pension which seems bonkers.

I'm holding out to see what my benifit statement says when it comes out later this year.

If the unsocial hours are not extrapolated prorata then I'll have to make sure that my last "big" full time salary is included in the "best 12 months in the last 3 years" calculation. 

This would mean either taking the pension by 31st March 2023 or by protecting my pension at the 20/21 point (similar to what Bobinyorkshire suggested).

The fact that the CPI & therefore the NHS pension rise is going to be huge next year has just got me wondering if taking my pension now makes financial sense.

Who knew planning to relax could be so stressful :-)

saucer

spaniel101 said:

Thrugelmir said:

Korkyb said:

My question is: Given that the NHS pension annual increase is based on the CPI would I be better / just as well to take the pension now / ASAP.

1995 scheme also increases annually by a factor of 1.5% prior to retirement. Doesn't sound much however compounding over the years mounts up. 

My understanding is that 1995 Final Salary 'Officers' is straight Final Salary, best of last 3, but there is also a 1995 +1.5% 'dynamised factor' applied to some 'Practitioners', GPs/etc (between Primary / Secondary Care), or something alike.   I am sure someone will clarify my vague description!      

The ‘dynamised’ income caveat applies, as I understand it, to the non-salaried income of GPs etc. The description pops up on the very helpful BMA pensions website but doesn’t apply to the vast majority of NHS staff who are paid by fixed salary. 

DoublePolaroid

saucer said:

spaniel101 said:

Thrugelmir said:

Korkyb said:

My question is: Given that the NHS pension annual increase is based on the CPI would I be better / just as well to take the pension now / ASAP.

1995 scheme also increases annually by a factor of 1.5% prior to retirement. Doesn't sound much however compounding over the years mounts up. 

My understanding is that 1995 Final Salary 'Officers' is straight Final Salary, best of last 3, but there is also a 1995 +1.5% 'dynamised factor' applied to some 'Practitioners', GPs/etc (between Primary / Secondary Care), or something alike.   I am sure someone will clarify my vague description!      

The ‘dynamised’ income caveat applies, as I understand it, to the non-salaried income of GPs etc. The description pops up on the very helpful BMA pensions website but doesn’t apply to the vast majority of NHS staff who are paid by fixed salary. 

Indeed. Practitioners for NHS pension purposes are GP’s and dentists. The 1995 pension for Practitioners is entirely different to the final salary scheme that applies to other NHS staff in that it’s a CARE scheme with a 1.4% accrual rate and “dynamisation” being the mechanism to ensure the pension keeps up with (in fact beats) CPI inflation, hence the +1.5%. Inflation protection in the regular scheme is adequately covered by the fact it’s a final salary scheme, at least in theory. 

At least, that’s my understanding after trawling through endless resources in recent months. I’ve been in the scheme for 18 years and have only grasped how it all works in the last fraction of one.