NHS input amount calculations

Yukster

I have an NHS DB pension; I am a member of both the 1995 and 2015 schemes. I also pay into a SIPP

I am sure I am not the only one who struggles to guestimate the input amount (growth) of his NHS pension to be able to use all of my pension allowance and available tax relief. I had someone help me - having tried it myself and failed to make sense of NHS pension information - calculate the 1995 and 2015 input amounts in order to be able to pay the remainder of my allowance into my SIPP.  According to the calculations done for me, the input amount for the 1995 scheme is 0 in the 2021/22 tax year. I was told that the reason why that is the case is because the cpi rate (3.1%) was greater than the salary increase (3%) of just under £2000 in that tax year. However, when I called NHS pension after the end of the tax year (because they annoyingly don't provide any figures before that date) they told me that my input (growth) amount for the 1995 scheme is in the region of £7000 and I requested this in writing and asked them to explain how this was calculated. Incidentally, the 2015 calculations done for me were more or less correct and are roughly in line with what NHS pension figure given to me.

If the calculations done for me are correct, then I won't have exceeded my allowance. However, if the figure provided by NHS pensions is correct then I have exceeded my allowance and am due to pay a fine, arrgggghhhh.

My question is whether anyone here can advise whether the figure of 0 input amount for the 1995 NHS pension scheme sounds correct and if not why not

Many thanks in advance for your help

Marcon

Yukster said:

I have an NHS DB pension; I am a member of both the 1995 and 2015 schemes. I also pay into a SIPP

I am sure I am not the only one who struggles to guestimate the input amount (growth) of his NHS pension to be able to use all of my pension allowance and available tax relief. I had someone help me - having tried it myself and failed to make sense of NHS pension information - calculate the 1995 and 2015 input amounts in order to be able to pay the remainder of my allowance into my SIPP.  According to the calculations done for me, the input amount for the 1995 scheme is 0 in the 2021/22 tax year. I was told that the reason why that is the case is because the cpi rate (3.1%) was greater than the salary increase (3%) of just under £2000 in that tax year. However, when I called NHS pension after the end of the tax year (because they annoyingly don't provide any figures before that date) they told me that my input (growth) amount for the 1995 scheme is in the region of £7000 and I requested this in writing and asked them to explain how this was calculated. Incidentally, the 2015 calculations done for me were more or less correct and are roughly in line with what NHS pension figure given to me.

If the calculations done for me are correct, then I won't have exceeded my allowance. However, if the figure provided by NHS pensions is correct then I have exceeded my allowance and am due to pay a fine, arrgggghhhh.

My question is whether anyone here can advise whether the figure of 0 input amount for the 1995 NHS pension scheme sounds correct and if not why not

Many thanks in advance for your help

Who did the calculations - and was the person who did them given correct information about your membership 'status' - i.e. deferred or active?

NedS

It is not difficult to calculate this for yourself. Take a look at the table in the first port of this thread and follow steps 0 to 6:

https://forums.moneysavingexpert.com/discussion/6370123/is-cpi-included-when-calculating-pension-input-for-annual-allowance-alpha-defined-benefit-pension/p1

You will know the opening values for 2022/23 (step 0) as these will be the closing values from your last pension statement issued on or after April 2022.

You can estimate the closing value (step 4) as you know what pay rise you have received this year.

There are also worked examples in this NHS factsheet (the steps are the same although they are numbered differently):

https://www.nhsbsa.nhs.uk/sites/default/files/2017-04/Annual Allowance Example calculations Factsheet v3.0 10.13 - Copy.pdf

Yukster

NedS said:

It is not difficult to calculate this for yourself. Take a look at the table in the first port of this thread and follow steps 0 to 6:

https://forums.moneysavingexpert.com/discussion/6370123/is-cpi-included-when-calculating-pension-input-for-annual-allowance-alpha-defined-benefit-pension/p1

You will know the opening values for 2022/23 (step 0) as these will be the closing values from your last pension statement issued on or after April 2022.

You can estimate the closing value (step 4) as you know what pay rise you have received this year.

There are also worked examples in this NHS factsheet (the steps are the same although they are numbered differently):

https://www.nhsbsa.nhs.uk/sites/default/files/2017-04/Annual Allowance Example calculations Factsheet v3.0 10.13 - Copy.pdf

Thank you NedS for posting the example calculation. I tried with the help of my partner to follow it to do my calcuation but fount it difficult. This is partly due to not knowing what some terms mean and how they apply in my case.

I went through the example and attempted to calculate the Input amount which came up as £32,039.01. That looks unlikely, given that the difference between the opening and closing value of the 1995 scheme is £7,359.

The figures I have are labeled slightly differently from the figures in the example calculation. I have the 'opening value' and the 'closing value' of the 1995 pension scheme for 2021/22 and the three previous years.

I would be grateful if you could please explain how I should calculate the figure for 'step 0'. Is it 'benefits built up at the end of the previous pension input period' = the opening value + (closing value-opening value) for 2020/21?

To calculate the amount for step 4 is it 'benefits built up at the end of the current pension input period' = the opening value + (closing value-opening value) for 2021/22?

NedS

For you, because you are interested in Tax Year 2022/23 (this tax year), step 0 is the amount of annual pension you have accrued at April 2022 (you can read this from your April 2022 statement). You have used the previous closing PIA value which has been multiplied by 16 and the lump sum added (clearly you are not going to be entitled to an annual pension of £300k).

I would also question why no lump sum has been added at steps 2 and 5 as the NHS 1995 scheme provides a standard lump sum of 3 times annual pension.

How does your 1995 pension increment each year? Is it still linked to final salary, or is it index-linked rising with inflation as in deferment?

NedS

Lets work through an imaginary example for you, for your 1995 pension for the current tax year 2022/23

Lets assume year ending April 2022 your pensionable salary was £80,000 per year, and that this year you received a 4% pay rise taking it to £83,200 for this tax year. Lets assume you have 15 years pensionable service in the 1995 scheme. Because you are not accruing any more years in the 1995 scheme, this will be 15 years pensionable service for both the opening and closing value calculations. The NHS 1995 scheme is an 1/80th scheme, so you will have accrued 15/80ths.

Step 0: Current pension = 15/80 x £80,000 = £15,000 annual pension

Step 1: £15,000 x 16 = £240,000

Step 2: lump sum is 3 x annual pension for NHS 1995 scheme: £240,000 + (3 x £15,000) = £285,000

Step 3: Increment by CPI in Sept 2021 (3.1%) £285,000 + 3.1% = £293,835. This is your opening amount.

Step 4: Predicted pension at April 2023 - 15/80 x £83,200 = £15,600 x 16 = £249,600 (as we know we have a 4% pay rise this year and we still only have 15 years service in the 1995 scheme).

Step 5: Our lump sum is now 3 x £15,600 = £46,800, added to  £249,600 = £296,400

Step 6: £296,400 - £293,835 = £2,565. This is our PIA value for the NHS 1995 scheme.

You can repeat the above calculation using your salary, length of pensionable service and pay rise details.

The reason we have a small positive value is the pay rise (4%) is slightly higher than inflation (3.1%), and there is no additional year of benefits accrued in the 1995 section of the scheme. If the payrise were less than the previous year's inflation, then the value would be negative, and hence a PIA of zero would be used when calculating your Annual Allowance.
You will need to do similar calculations for the 2015 section in accordance with that section's scheme rules relating to accrual and lump sum entitlement.