NHS 1995 Pension doesn't grow after 60

Moonwolf

This doesn't apply to me but after a recent conversation with a colleague who is 63 and was asking me about pensions (I've become the the resident pension bore) I've realised recently that many NHS Staff are giving up free money without realising.  I don't think there is clear information out there, I'm wondering if this is significant enough for an article on the site, or is there one I have missed?

Until the new schemes came in, if you carried on working after 60 your pension would continue to grow by 1/80th each year and by the increase in your final salary.  Also there were restrictions that meant taking the pension and continuing working could be difficult.

Since the 2015 scheme, McCloud and the rule changes that allow retire and return there is probably no benefit to not taking the 1995 pension at 60 unless the worker has reason to believe their final salary will significantly increase.

While not taking the pension will mean that in future it will grow by any increases in final salary, most people at 60 will be at the top of band and can expect their salary to grow by around inflation, over the last few years it has been less.  If you take your pension it will grow by inflation anyway.

In the meantime any additional years worked won't add 1/80ths because all new pension is accrued against the 2015 scheme.

If someone waits until 67 to take their 1995 pension at the same time as their 2015 they have given up 7 years of 1995 pension. That is 7 years of free money that can never be recovered. That would need a big increase in salary or a small increase over inflation and a very long life to make it worthwhile.

If you don't need the money or it will push you into 40% tax, just put it into additional pension or a private pension.

Universidad

Similar story with USS and pre-2011 FS benefits, which can usually be taken unreduced at either 60 or 63.5, but there are no LRFs applied up to the actual NPA.

LightFlare

It is all made pretty clear (imo)

Full details and implications were available when the 2008 and 2015 sections were introduced and a decision had to be made to stay on the 1995 or not

crv1963

Replying paragraph by paragraph as it wont let me quote your post Moonwolf-

1) Lack of knowledge about the Pensions- like most of the population methinks! There is clear information out there simply not enough people read it. There is a very good NHS Pensions group on FB, with some very knowledgeable members and admin.

2) The 2015 scheme has a better accrual rate of 1/54th as opposed to 1/80th, but no automatic lump sum.

3) Rule changes were designed to allow retire and return to be made easier for staff so NHS could retain skills/ knowledge and workers. Since they abolished abatement it is easier to do. However it appears patchy across different Trusts to how this works, there doesn't seem to be a National approach. Anyone not in the NHS shouldn't doubt that it is a real incentive- in my Team of 33, 6 soon to be 7 are Retire and Return workers, in my previous Team 5 out of 23 were retire and return. My Trust seems to have embraced the process and actively encourages R&R.

4) I completely agree.

5) This is also true but some of us could retire at 55 years old as Mental Health Officers and the new scheme has a better accrual rate.

6) Only yesterday I was speaking with a colleague who said he would take both at 67. We got his TRS up and quick calculation at todays figures if he delays taking the 95 scheme until he's 67 he will lose 56k! Now he plans to R&R at age 60!

7) I initially was placed in NEST and opened a SIPP to avoid paying too much tax, then I was allowed to join the 2015  scheme and did so. I have now bought on a monthly basis additional pension, I pay 470pm, which seems a lot of money but it reduced my Pension tax by 350pm (so that increased) and by simply sacrificing my 120pm pay rise from this years pay award I don't feel that I am any worse off, I have reduced by take home salary but increased my take home Pension. I remain in the 40% tax bracket for a part of my income but I am comfortable with that.

You raised some good points Moonwolf!

hyubh

Universidad said:

Similar story with USS and pre-2011 FS benefits, which can usually be taken unreduced at either 60 or 63.5, but there are no LRFs applied up to the actual NPA.

Although in this case, 60 is the NPA, and there's no LRF for retiring later, be that 65, SPA or whenever...

Zeyfur2021

Some really good points raised, monwoolf

Marcon

Moonwolf said:

This doesn't apply to me but after a recent conversation with a colleague who is 63 and was asking me about pensions (I've become the the resident pension bore) I've realised recently that many NHS Staff are giving up free money without realising.  I don't think there is clear information out there, I'm wondering if this is significant enough for an article on the site, or is there one I have missed?

I think a table summarising the position in respect of each of the major public sector schemes (and possibly some of the really large private sector schemes such as USS) where the pension isn't taken at a scheme's Normal Retirement Date would be an excellent idea.

There is nothing consistent about how the schemes treat 'late retirement' - eg the Civil Service Classic scheme has an NRD of 60 and if the pension isn't claimed, there is no late retirement factor, it gets normal inflationary increases until claimed, and when it is claimed payments are backdated to age 60, with the option to have the backdated element taxed as a lump sum in the year of receipt, or allocated to the individual tax years when the member's entitlement to the pension arose.

Dazed_and_C0nfused

Marcon said:

Moonwolf said:

This doesn't apply to me but after a recent conversation with a colleague who is 63 and was asking me about pensions (I've become the the resident pension bore) I've realised recently that many NHS Staff are giving up free money without realising.  I don't think there is clear information out there, I'm wondering if this is significant enough for an article on the site, or is there one I have missed?

I think a table summarising the position in respect of each of the major public sector schemes where the pension isn't taken at a scheme's Normal Retirement Date would be an excellent idea.

There is nothing consistent about how the schemes treat 'late retirement' - eg the Civil Service Classic scheme has an NRD of 60 and if the pension isn't claimed, there is no late retirement factor, it gets normal inflationary increases until claimed, and when it is claimed payments are backdated to age 60, with the option to have the backdated element taxed as a lump sum in the year of receipt, or allocated to the individual tax years when the member's entitlement to the pension arose.

@Marcon I could well be missing something here but that seems an easy way to avoid partial retirement if the abatement element of partial retirement was going to result in less hours than someone wanted.

Just go part time at 60, doing whatever hours you want, say 4 days instead of 5, and leave your Classic pension unclaimed.  But still adding 4/5ths of the standard Alpha accrual.

Then 3 years later you decide to retire and take your Classic pension.  At which point you are paid what you were entitled to for the previous 3 years but have still managed to work the extra hours you wanted (4 days instead of 2-3 days if abatement had been a factor that was unacceptable to the employee) and build up more in Alpha.

Tax will clearly be a factor but the ability to get the income spread across the 3 years it could have been paid in will help with that.

Lowtrawler

My wife has just claimed her NHS 1995 pension at age 60 on R&R. For the vast majority of NHS workers reaching 60, it would be crazy not to do this.

As you would expect, my wife has a number of colleagues and friends around the same age and working in the NHS. All of them have been planning to work beyond 60 without claiming the 1995 pension. I have spoken to 5 of them now and 2 are planning to claim their 1995 pension. The other 3 failed to understand the impact, thought it too complicated and decided to bury their heads in the sand. There appears to be zero proactive support by the NHS, Unions or the pension scheme to explain why most are missing out if they fail to claim the 1995 pension.

It is indicative of a wider problem with the NHS pension scheme. None of the NHS workers I have spoken to really understand the various schemes or how valuable they are to their overall pay. None of the people I spoke to were aware of the additional pension options to enhance their pension and so had not considered whether it was right for them to do so. Even when I sat down and explained they could buy £1 of index linked pension benefit for £17 when they would have to pay over £30 to buy the same benefit in the open market, it was not fully understood. Morally, I believe the NHS and the Unions have a responsibility to better educate and explain pensions.

crv1963

Lowtrawler said:

My wife has just claimed her NHS 1995 pension at age 60 on R&R. For the vast majority of NHS workers reaching 60, it would be crazy not to do this.

It is indicative of a wider problem with the NHS pension scheme. Morally, I believe the NHS and the Unions have a responsibility to better educate and explain pensions.

I agree Lowtrawler, many would rather talk about the Weather than their pension! Several of my colleagues were going to opt out "for a few years while I pay this or that,,,". I soon put them right on what they were actually going to lose, luckily they haven't opted out now. I had to explain in detail to one of our Consultants exactly what he was getting in terms of employer contributions before he got his head around it all.

Marcon

crv1963 said:

Lowtrawler said:

My wife has just claimed her NHS 1995 pension at age 60 on R&R. For the vast majority of NHS workers reaching 60, it would be crazy not to do this.

It is indicative of a wider problem with the NHS pension scheme. Morally, I believe the NHS and the Unions have a responsibility to better educate and explain pensions.

I agree Lowtrawler, many would rather talk about the Weather than their pension! Several of my colleagues were going to opt out "for a few years while I pay this or that,,,". I soon put them right on what they were actually going to lose, luckily they haven't opted out now. I had to explain in detail to one of our Consultants exactly what he was getting in terms of employer contributions before he got his head around it all.

I wonder exactly what explanation you gave...? Question is a genuinely interested one.