Advice on transferring an existing personal pension into the NHS pension scheme

Stonedofmoo

Evening everyone.

I'd like some assistance with making a financial decision and I don't have anyone to ask.
I joined the NHS in August and signed onto their pensions scheme. I have an existing pension residing at PensionBee worth around £55k which they estimated to be worth £85k at retirement age if nothing else is added. 

I've been going through the process of transferring it into my new NHS pension pot. The NHS pensions dept wrote to me today to confirm the transfer in amount, but wrote it in such a way where I'm a tad uncertain of what I am reading.

They put it like this
2015 NHS Pension Scheme
Pensionable earnings credit £199,513.93
Club Earned Pension credit £0.00
Scheme year ending 31/03/2023
Pensionable Membership 4 years 093 days.

I was expecting them to simply give me a transfer in amount of approximately £54-55k. What is my Pensionable earnings credit? Is that the equivalent of PensionBee's retirement estimate? If so it looks like transferring in is the right move, but I want to be sure before going ahead.

Happy Christmas all

Dazed_and_C0nfused

You don't have a pension "pot" with the standard NHS pension scheme.

It's a Defined Benefit scheme so you accrue a pension entitlement according to the rules of the scheme, typically you will pay from 5.1% up to 13.5%.

And in return you will accrue a pension worth 1.85% of your salary.  Which has an element of inflation protection.

Do you understand the basic differences between defined benefit and defined contribution schemes?

Stonedofmoo

No I don't, one of the reasons I let pension bee handle things until now!

Essentially is combining my pension into the NHS a better move than keeping the independent pension bee account?

greatkingrat

The NHS scheme accrual rate is 1/54, so the transfer will buy you a pension of 199513 / 54 = 3694 per year (in today's money). As for the PensionBee pot, a rough estimate would be 3.5% of 85000 = 2975 per year in drawdown. That could be more or less depending on investment returns, while the NHS income would be secure.

dunstonh

I have an existing pension residing at PensionBee worth around £55k which they estimated to be worth £85k at retirement age if nothing else is added. 

That wont be an estimate.  It will be a synthetic projection using assumptions. And the projection is based on todays terms. not future money terms.  So, it will be higher than £85k but have the spending power of £85k.   It is important that any calculations you do take that into account.

Marcon

Stonedofmoo said:

No I don't, one of the reasons I let pension bee handle things until now!

Essentially is combining my pension into the NHS a better move than keeping the independent pension bee account?

It's worth getting a grasp of the principles of defined benefit and defined contribution schemes. A good starting point is here: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics

You have a 'pot' of money with your pensionbee defined contribution (DC) pension - which is fine; loads of people have DC pensions.

Defined benefit schemes operate differently, and it isn't always easy to see whether a transfer is in your interests. I've just looked at the NHS guide to transferring in and I'm not sure it's going to help you much! Having a chat with money helper (see link above for contact details) might be much easier for you. They can't give advice, but they can give you clear, helpful explanations, and often having information in a form you can understand is enough to enable you to make an informed decision.

Albermarle

In fact Pension Bee also have an explanation of the difference.

What is a defined benefit pension? | Final salary pension (pensionbee.com)

MX5huggy

I would (and did, albeit on around £10k) do the transfer. 

Your turning variable pension whose value is at the will of the markets and your skill as an investor (even just leaving in pension bee’s default fund is a choice). Into fixed income for life when you retire it is index linked (I can’t see if it benefits from the +1.5% over CPI regular NHS contributions do, I expect not). So you know in todays money you will get £3694 per year for life from state pension age (you can retire early but it is reduced to reflect the longer payment).

it’s a one time offer you won’t have the opportunity again. 

If you want and can afford it you can build up a new DC pension pot. 

Doing it means if you leave the NHS in the first 2 years you won’t have to have you NHS pension contributions refunded or transferred to another scheme.

Getting_greyer

Can anyone say how the pension credit figure is worked out? 

Is it something like 199k = initially salary x 4.33 years?  Is the 55k pot buying equivalent years so the membership years would be smaller or larger depending on the pot size transfered?

Stonedofmoo

MX5huggy said:

I would (and did, albeit on around £10k) do the transfer....

Thank you, this was very helpful 

ggmf

Along the same lines as @mx5huggy - You do not state how old you are, if you have any other pension provisions, or what your final plans may be. I will just add that if you decide to transfer your DC into the NHS 2015 scheme then you will be unable able to access the NHS pension until your normal state pension age (currently, rules may change again in the future, who knows?).

You may wish to consider, if future you might wish to use the DC 'pot' to 'retire' earlier and bridge the gap to normal pension age, when the 2015 scheme becomes payable without reductions... just something extra to think about.