Help me understand my wife's NHS pension please

LightFlare

arthur_fowler said:

Purplelady65 said:

Although she will retire next year she will take her pension at the respective normal retirement date (60 and 65 respectfully) so should be no actuarial adjustment. 

Re the NHS 2015 scheme the retirement age is linked to State Pension Age which for your wife will not be age 65. It will be either 66 or 67 so if you draw it at 65 there will be a reduction. 

Oh, thanks for that! Yes 67. Won't take the reduction, will need to plan to bridge that gap.

the reduction (I think) is on the region of 4-5% per year early -- will see if i can find the actual figures/document



depending on when she started her NHS pension- she may be eligible for adjustment to part of the 2015 section due to the McCloud judgement.

When the pension is "redeemed" - I believe you will get the option to have 2015 - 2022 considered in either the 1995 or 2015 section (there are pros and cons to both) 

Moonwolf

arthur_fowler said:

Moonwolf said:

These are my calculations in case I have made an error.

Year End	Pensionable Earnings	Pension Earned	Revaluation	Pension
2016	£15,737.84	£291.44	1.4	£291.44
2017	£14,953.42	£276.92	2.5	£572.44
2018	£14,882.98	£275.61	4.5	£862.36
2019	£15,469.50	£286.47	3.9	£1,187.64
2020	£16,297.68	£301.81	3.2	£1,535.76
2021	£16,428.20	£304.23	2	£1,889.13
2022	£10,693.09	£198.02	4.6	£2,124.94
2023	£10,693.09	£198.02	11.6	£2,420.70
2024	£10,693.09	£198.02	8.2	£2,899.53
				£3,137.29

I can't make the maths work. Is the revaluation applied to that year or the next? 

i.e. is the 1.4 revaluation for 2016 applied to £291.44 or £276.92 either way I can't reach your numbers.

Thanks for your help

The revaluation is applied in April after the new financial year has started.  This means it doesn't show up on the reward statements which are as at 31st March or end of the financial year.

So the first column is the year end.  The second column is pensionable earnings which can be taken from the last payslip in the year.  The Pension earned is just 1/54th of that.  The revaluation figure is published usually around February, it is "treasury order" (basically CPI from the previous September)  + 1.5% while in employment and CPI after that.

The last column is the cumulative pension figure to the previous year * revaluation (1+revaluation/100) + this years pension earned. That represents last years valuation against last years pot plus this years growth.  That figure has so far matched my total reward statement. 

The last row is then this years revaluation applied to the whole pot, the figure that should be payable after the April revaluation.

FIREmenow

Under the McCloud judgement, has she been given information and/or asked to choose between 1995 and 2015 schemes for the period from 2015-2022 (the remedy period)?

When she puts the paperwork in to retire they will do a calculation of the pension both ways for her to decide which is best to take. It can be better to have 1995 conditions applied up to 2022 because of the NPA of 60 . But there are pros and cons of each scheme depending on circumstances as said above. 

They are currently operating a 'rollback' process for the remedy period, whereby many members are assumed to have been in the legacy scheme up until 2022, not the 2015 scheme, and retirement quotes would reflect this. Members would still need able to choose whichever scheme is best for them for the remedy period, but the default will switch to legacy scheme where previously it has defaulted to 2015 scheme membership.

If they haven't got through the backlog by the time you're wife wants to retire and she is part of rollback, her pension paid initially will be based on legacy scheme rules to 2022, and they will later ask her to confirm her choice and amend the pension as necessary. Not as helpful if you need to decide whether to retire in one year or six though.

Some info here:  https://www.nhsbsa.nhs.uk/public-service-pensions-remedy-mccloud/rollback-remedy-period-service

My husband is very likely to choose 1995 scheme rules for the remedy period for the NRA of 60, I think only changing to a lower grade job in the years before 60 would sway this in his case.

arthur_fowler

saucer said:

Bear in mind that the reduction is meant to be cost neutral because the pension will be paid for longer.

Good point.

arthur_fowler

Thanks for the posts about McCloud judgement. We knew nothing about it. I will need to investigate.

MX5huggy

saucer said:

Bear in mind that the reduction is meant to be cost neutral because the pension will be paid for longer.

Further more if she has no other income that will be taxed she could get several years of NHS pension untaxed as when the State Pension starts that will use up her tax allowance. So £5000 untaxed for 5 years better than waiting 5 years so she can get £6100 ish and be taxed 20% on it. 

arthur_fowler

Moonwolf said:

arthur_fowler said:

Moonwolf said:

These are my calculations in case I have made an error.

Year End	Pensionable Earnings	Pension Earned	Revaluation	Pension
2016	£15,737.84	£291.44	1.4	£291.44
2017	£14,953.42	£276.92	2.5	£572.44
2018	£14,882.98	£275.61	4.5	£862.36
2019	£15,469.50	£286.47	3.9	£1,187.64
2020	£16,297.68	£301.81	3.2	£1,535.76
2021	£16,428.20	£304.23	2	£1,889.13
2022	£10,693.09	£198.02	4.6	£2,124.94
2023	£10,693.09	£198.02	11.6	£2,420.70
2024	£10,693.09	£198.02	8.2	£2,899.53
				£3,137.29

I can't make the maths work. Is the revaluation applied to that year or the next? 

i.e. is the 1.4 revaluation for 2016 applied to £291.44 or £276.92 either way I can't reach your numbers.

Thanks for your help

The revaluation is applied in April after the new financial year has started.  This means it doesn't show up on the reward statements which are as at 31st March or end of the financial year.

So the first column is the year end.  The second column is pensionable earnings which can be taken from the last payslip in the year.  The Pension earned is just 1/54th of that.  The revaluation figure is published usually around February, it is "treasury order" (basically CPI from the previous September)  + 1.5% while in employment and CPI after that.

The last column is the cumulative pension figure to the previous year * revaluation (1+revaluation/100) + this years pension earned. That represents last years valuation against last years pot plus this years growth.  That figure has so far matched my total reward statement. 

The last row is then this years revaluation applied to the whole pot, the figure that should be payable after the April revaluation.

Thanks for the detailed help. Got it now.

arthur_fowler

MX5huggy said:

saucer said:

Bear in mind that the reduction is meant to be cost neutral because the pension will be paid for longer.

Further more if she has no other income that will be taxed she could get several years of NHS pension untaxed as when the State Pension starts that will use up her tax allowance. So £5000 untaxed for 5 years better than waiting 5 years so she can get £6100 ish and be taxed 20% on it. 

She has another (relatively small) DB pension too that kicks in at 60, but yes, you are right, taking the NHS pension earlier makes sense from a tax PoV.

Purplelady65

Another thing to consider is that with the 1995 scheme there is a lump sum and with the 2015 scheme there isn’t a lump sum (unless you convert a proportion of the pension to be paid into a lump sum but the general advice on these boards is not to do that due to the poor rate). 

arthur_fowler

Thanks. 

The more I find out about this, it seems the less I know. Alongside the McCloud complications, I have realised that she paid AVCs for quite a lot of years and I am struggling to find what happened to them. I need to dig out old paperwork in the hope that helps. Annoyingly I didn't download each years TRS and I can't see anything on the current dashboard that is helpful in terms of the AVCs.

I have notes that shows that at least some AVCs were used to buy extra years, but can't see that reflected in the dashboard.