NHS 2015 Deferred Membership and increases

Moonwolf

If a person leaves the NHS 2015 scheme and a pension becomes deferred, is there a set date they have to be employed after which the extra 1.5% is removed or is it applied as long as pension was accrued in the previous year?

Or more simply, is it worth planning my "retirement" data to maximise that year's pension increase?

In the NHS 2015 scheme the accrual rate is 1/54th and each year the previously accrued pension is increased by CPI (or Treasury order to be exact) + 1.5%.

This increase is applied, I think, the first Monday after the new tax year the following year.

If a person leaves and their pension is deferred then the pension will grow by CPI without the extra 1.5%.

I'm currently hoping to retire early next spring at 59, probably on 31st March, without taking this pension*.  Obviously we don't yet know the CPI figure that will be applied but the extra 1.5% would be for me, just under £200 a year for life.  Not worth tying myself in knots for, but it would be worth, for example, setting my leaving date for the 1st, 10th April or even 30th April if it made a difference.

thanks

Moonwolf

*I'll probably be using my DC scheme as a bridge and other DB pensions kick in later in the year, I have considered taking this pension early and taking the actuarial reduction which leaves me with a bit more money in most positive growth scenarios but could be a lot less in negative growth.

Sarahspangles

I read the guidance as ‘will be revalued if you’re in employment after 31 March’. I’d like to know if that’s correct, as that is likely to be my last day. I assume that the checks are made when Total Reward Statements are prepared i.e late spring/early summer so that payroll data has had a chance to be checked. You don’t miss a year/part year of contributions, just the uplift on it.

I think the day that increases are reflected in payments is not related - that mirrors State pension method of calculation.

spaniel101

https://www.nhsbsa.nhs.uk/department-health-and-social-care-confirms-change-date-annual-2015-scheme-pension-cost-living-review#:~:text=The 2015 Scheme pensions are,will happen on 6 April.

**  " The 2015 Scheme pensions are reviewed using the Consumer Price Index (CPI) in the year before, plus an additional 1.5%. This is called 'revaluation' and it usually happens on 1 April, but from 2023 onwards it will happen on 6 April. "

https://www.nhsbsa.nhs.uk/sites/default/files/2023-11/2015 Members Guide (V12) 10.2023.pdf (as of Oct 2023, requires update)

2. Annual revaluation

Your pension earned each year will be increased each year by a rate, known as ‘revaluation’, in

the period before you retire or leave.

In this Scheme the revaluation rate is determined by Treasury Orders plus 1.5% each year.

Treasury Orders are the method by which the Treasury notifies the value of the change to be

applied as part of revaluation. The pension earned in a Scheme year (April to March) is revalued

on 1 April (** now 6 April) of the following and each subsequent Scheme year until you retire or leave. For

example, if the Treasury Order in a year was 2% then the pension would be revalued

by 3.5% at the beginning of the following year. The revaluation rate may go up or down and may

even be a negative amount.

If you leave this Scheme before becoming entitled to claim your retirement benefits, annual

revaluation stops and is replaced at retirement by the addition of Pensions Increase. Pensions

Increase is used to maintain the value of your pension against rises in the cost of living.




Suffice to say, you need to be an 'active' member as of 6 April to receive the +1.5% revaluation top up.

Moonwolf

spaniel101 said:

Suffice to say, you need to be an 'active' member as of 6 April to receive the +1.5% revaluation top up.

Thanks, I was beginning to read it like that but wasn't sure which is why I asked the question.

It didn't read as that explicit to me, and there are a few places where it isn't up to date.  

It does seem worth staying an extra week for an extra 1.5% pension though.

Moonwolf

I asked this question of NHS BSA

"As I understand it in the 2015 scheme the revaluation is performed on the 1st April and increases the accrued pension by Treasury Order plus 1.5%. 

If a pension becomes deferred it is increased in line with cost of living when it is put into payment.

When a person leaves the NHS, is there a key point for the revaluation to be “switched off”, is it immediate?

Is there a date when someone needs to be employed by the NHS?

I’m thinking of leaving the NHS at the end of this financial year at the age of 59, retiring and living off a non-NHS pension and deferring my 2015 scheme until my retirement age. 

If I left on the 31st March 2025 would I lose the revaluation on the 1st April 2025 or would that still happen? 

If I stayed to the 1st April 2025 would that change? "

but didn't get a definitive answer, just the following, which reframed my question.

"In a Career Average Revalued Earnings (CARE) Scheme, your pension is based on your pensionable pay throughout your career.
Your pension is calculated for each year separately then increased by a set revaluation rate which is linked to inflation"

and this link https://faq.nhsbsa.nhs.uk/knowledgebase/article/KA-04582/en-us

Both the "pension increase" and "treasury order" are CPI at the moment but I assume the terminology relates to something in legislation that means they can change it if they want.

Dazed_and_C0nfused

Possibly part of the issue is your question is redundant now as the revaluation date is no longer 1 April, it's 6 April.

hugheskevi

Moonwolf said:

Both the "pension increase" and "treasury order" are CPI at the moment but I assume the terminology relates to something in legislation that means they can change it if they want.

Pension increase is CPI but cannot be negative (ie is zero in the event of deflation). Treasury Order is CPI but can be negative. As they are different, they could be altered separately.

Sarahspangles

Dazed_and_C0nfused said:

Possibly part of the issue is your question is redundant now as the revaluation date is no longer 1 April, it's 6 April.

I’m recalling now that they recently moved the revaluation date into the next tax year because in the year that revaluation ran at over 10%, plus the 1.5% for current employment, it reduced the impact on those already approaching Annual Allowance limits. 

Contracts in my bit of the NHS most often end on 31st March, I’m wondering how often people negotiate on appointment to get a date post 6 April!

Moonwolf

Dazed_and_C0nfused said:

Possibly part of the issue is your question is redundant now as the revaluation date is no longer 1 April, it's 6 April.

@spaniel101 pointed out the 6th April but if that is the reason my question can't be answered, why not point out the error in the guidance? 

Sarahspangles

Moonwolf said:

Dazed_and_C0nfused said:

Possibly part of the issue is your question is redundant now as the revaluation date is no longer 1 April, it's 6 April.

@spaniel101 pointed out the 6th April but if that is the reason my question can't be answered, why not point out the error in the guidance? 

Disappointing that web page is out of date - this is the second year the revaluation date has been 6 April.

However I don’t think NHSBSA read/answered your question!

spaniel101

After digging deeper...and deeper...maybe this will help:



https://www.legislation.gov.uk/uksi/2015/94/schedule/9/part/1/data.xht?view=snippet&wrap=true

Meaning of “leaver index adjustment”

3.—(1) [F3Subject to sub-paragraph 2A, the] leaver index adjustment for an amount of accrued earned pension (other than an amount of club transfer) accrued earned pension is an amount calculated as follows—

• Step 1 Add 1.5 to the percentage increase or decrease in prices specified in an order [F4(in respect of the NHS Pension Scheme 2015)] made by the Treasury under section 9(2) of the 2013 Act in relation to the leaving year.

• Step 2 Multiply the result at Step 1 by

  where—

  • A is the number of complete months in the period between the beginning of the leaving year and the end of the relevant last day; and

  • B is 12.

  The resulting percentage is the leaver index percentage.

• Step 3 Multiply the amount of accrued earned pension by the leaver index percentage. 
• The resulting amount is the leaver index adjustment.

Although Im not enough of an expert to understand this fully, it maybe that leaving on 31 March (of any given future year) would result in, at least, a '11/12 leave index adjustment' or even 12/12, with revaluation date now being applied 6 April

(- thoughts please @hugheskevi ?)