Moving from CARE to Final Salary - should I?

Workerbee999

ewaste said:

The majority of sections have a pensionable pay cap of RPI +0.25%, excluding Network Rail which is flat RPI.

This is the September rate of RPI for the previous financial year e.g. the September 2020 RPI rate is used as the Pensionable Pay Cap figure for the 2021-2022 Financial Year.

If you have a basic salary of £30,000 and receive a Pay Rise of 5% within the 2021-2022 Financial Year, you might expect your all service pensionable pay to rise to be £31,500. The September 2020 RPI rate was 1.1% (+0.25%) therefore your actual pensionable pay would rise to £30,405 due to the cap. 

Some but not all sections make use of Pensionable Restructuring Premiums for the excess above the pensionable pay cap. If your section does make use of PRPs in this manner you'd create a PRP for £1,095 pensionable for future service only, PRP guide above. 

It's also important to keep in mind the Basic State Pension deduction of x1.5 also in use for most sections i.e. approximately £12,183.60 for the 2023/2024 financial year. In April 2024 the BSP increases by 8.5% therefore the deduction becomes approximately £13,219.21

Therefore with a Pensionable Pay of £30,000 your section pay on which benefits are accrued is actually £17,816.40.

It's the interaction of these two cost control mechanisms within the scheme that becomes a major issue especially in the past few years. The link to ongoing earnings has actually resulted in the value of previous service being eroded, sometimes quite considerably in real terms. 

>>Anyone else reading please note there are fundamental differences between each RPS section.<<

Thanks v much

So, if I understand it right, any pay increases during 23/24 can be up to 15.75% before the cap would kick in, based on Sep 22 RPI @ 12.6%+0.25%? So a good year for pay increases?

Once you become a deferred member, does the Basic State Pension adj keep changing and potentially reducing the benefit or does the final pensionable pay become fixed and just increase with CPI? And the same when in payment?

Workerbee999

Workerbee999 said:

ewaste said:

The majority of sections have a pensionable pay cap of RPI +0.25%, excluding Network Rail which is flat RPI.

This is the September rate of RPI for the previous financial year e.g. the September 2020 RPI rate is used as the Pensionable Pay Cap figure for the 2021-2022 Financial Year.

If you have a basic salary of £30,000 and receive a Pay Rise of 5% within the 2021-2022 Financial Year, you might expect your all service pensionable pay to rise to be £31,500. The September 2020 RPI rate was 1.1% (+0.25%) therefore your actual pensionable pay would rise to £30,405 due to the cap. 

Some but not all sections make use of Pensionable Restructuring Premiums for the excess above the pensionable pay cap. If your section does make use of PRPs in this manner you'd create a PRP for £1,095 pensionable for future service only, PRP guide above. 

It's also important to keep in mind the Basic State Pension deduction of x1.5 also in use for most sections i.e. approximately £12,183.60 for the 2023/2024 financial year. In April 2024 the BSP increases by 8.5% therefore the deduction becomes approximately £13,219.21

Therefore with a Pensionable Pay of £30,000 your section pay on which benefits are accrued is actually £17,816.40.

It's the interaction of these two cost control mechanisms within the scheme that becomes a major issue especially in the past few years. The link to ongoing earnings has actually resulted in the value of previous service being eroded, sometimes quite considerably in real terms. 

>>Anyone else reading please note there are fundamental differences between each RPS section.<<

Thanks v much

So, if I understand it right, any pay increases during 23/24 can be up to 15.75% before the cap would kick in, based on Sep 22 RPI @ 12.6%+0.25%? So a good year for pay increases?

Once you become a deferred member, does the Basic State Pension adj keep changing and potentially reducing the benefit or does the final pensionable pay become fixed and just increase with CPI? And the same when in payment?

Sorry, I meant 12.6% + 0.25% = 12.85% ( I had multiplied by 1.25% rather than adding)