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

MX5huggy

@ggmf I’ve not seen anything to say you can’t take NHS pension that has come from a transfer in early. Just like standard NHS pension you can take it with reductions from 55. 

Stonedofmoo

Hi there. That's true, I'm 41 but currently have no intentions of retiring early 🙂

artyboy

Stonedofmoo said:

Hi there. That's true, I'm 41 but currently have no intentions of retiring early 🙂

Just to play devils advocate, at 41 I also had no intention of retiring particularly early - almost 9 years on and I have frankly had enough! The thought of only having a pension that I could only access in another 17ish years (and of course, your pension age could go up further!) would be a major disincentive for me.

So yes, in broad terms, it sounds like transferring is a good financial move, and one that removes any uncertainty - but it does also tie you in for the long haul, so please be very sure about being willing to work until 67/68/69 (or whenever SPA is when you get there)

MX5huggy

There’s no requirement to work till late 60’s, we will probably take our NHS and LGPS pensions at 60. If we’re lucky with other investments etc maybe even earlier. 

ggmf

MX5huggy said:

@ggmf I’ve not seen anything to say you can’t take NHS pension that has come from a transfer in early. Just like standard NHS pension you can take it with reductions from 55. 

True, however I did add - 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.

55 is not the normal pension age unless you are a special case.

hyubh

Stonedofmoo said:

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?

Personally I find this way of expressing a transfer into a CARE scheme quite cranky, even though it reflects the scheme regulations - so I'm not surprised you were initially confused.

Being a DB scheme, your 'pension' with the NHS is an annual income, for life, from the scheme's normal pension age. 
During each year of scheme membership (NHS scheme years run from 1 April to 31 March), your pensionable earnings for those 12 months determines what gets added to your pension. Since the 'accrual rate' is 1/54, that means your income in retirement is based on 1/54 your pay for each scheme year, added together. In addition, each April your previous total + the year's just gone is 'revalued' by inflation plus 1.5%, so long as you are an active member. (Once you leave, your accrued pension is increased by just inflation.)

What happens if you transfer in from a private sector scheme however? Whatever the 'transfer value' is, it needs to purchase additional DB pension somehow. In practice, the mechanics of this is that it purchases notional additional pensionable earnings to go with your actual pensionable pay for your first scheme year of membership. From there, the 1/54 and CPI+1.5% calculations are made as normal, and things continue as if you really had earned over 200K in 2022/23.

(In contrast, the notional pensionable membership gained alongside the notional additional earnings is mostly irrelevant. It can however matter for certain secondary benefits that are based on length of membership.)

GrubbyGirl_2

The 2015 scheme is based on average pay.  So the 4 years your transfer bought will equal 4/60th of your average annual salary.  So if it your final average salary is £40,000 then each year in the scheme will get you a pension of £666 so your 4 years bought will give you £2,666 per year

nigelbb

GrubbyGirl_2 said:

The 2015 scheme is based on average pay.  So the 4 years your transfer bought will equal 4/60th of your average annual salary.  So if it your final average salary is £40,000 then each year in the scheme will get you a pension of £666 so your 4 years bought will give you £2,666 per year

Sorry but your reply contains errors in every sentence.

The 2015 NHS pension scheme is based on your pay year by year at a rate of 1/54 adjusted for inflation each year. The OP has been credited with pensionable earnings of of £199,513.93 ie a pension of £3,694.70.

Lemon_dr1zzle

hyubh said:

Stonedofmoo said:

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?

Personally I find this way of expressing a transfer into a CARE scheme quite cranky, even though it reflects the scheme regulations - so I'm not surprised you were initially confused.

Being a DB scheme, your 'pension' with the NHS is an annual income, for life, from the scheme's normal pension age. 
During each year of scheme membership (NHS scheme years run from 1 April to 31 March), your pensionable earnings for those 12 months determines what gets added to your pension. Since the 'accrual rate' is 1/54, that means your income in retirement is based on 1/54 your pay for each scheme year, added together. In addition, each April your previous total + the year's just gone is 'revalued' by inflation plus 1.5%, so long as you are an active member. (Once you leave, your accrued pension is increased by just inflation.)

What happens if you transfer in from a private sector scheme however? Whatever the 'transfer value' is, it needs to purchase additional DB pension somehow. In practice, the mechanics of this is that it purchases notional additional pensionable earnings to go with your actual pensionable pay for your first scheme year of membership. From there, the 1/54 and CPI+1.5% calculations are made as normal, and things continue as if you really had earned over 200K in 2022/23.

(In contrast, the notional pensionable membership gained alongside the notional additional earnings is mostly irrelevant. It can however matter for certain secondary benefits that are based on length of membership.)

Agree, it’s a very strange way of expressing what the transfer will purchase. In my LGPS fund we simply say your transfer value of £x will purchase additional annual CARE pension of £y