NHS Pension - Taking Pensions Early

daparojo

I am hoping you can help, and tell me if I am missing something.

At 57 my partner has had her NHS pension updated, and with the McCloud options :

Scenario 1 - McCloud
1995 Scheme - Pension at 60 yo £7000
2015 Scheme - Pension at 67 yo £2100

If they took the 1995 and 2015 (reduced by 31%) at 60, they would get a combined pension of around £8450 per annum from 60.


Scenario 2 - Standard
1995 Scheme - Pension at 60 yo £3800
2015 Scheme - Pension at 67 yo £7600

If they took the 1995 and 2015 (reduced by 31%) at 60, they would get a combined pension of around £9100 per annum from 60.

Therefore Scenario 2 would be better per month, even though they would receive a lower lump sum i.e 10 k less at Scenario 2 - (£10000 / £650 (difference between Scenario 1 / 2) = Survive  after 15 years  to benefit from Scenario 2?

Is my judgement correct, or am I missing something ?

Thanks in advance,

Moonwolf

I don’t think you are missing anything it looks right to me.

As the 2015 accrues at 1/54th instead of 1/80th and the accrued “pots” grow at CPI + 0.5% the 2015 could be better than McCloud in situations where final salary hasn’t grown a lot.

hugheskevi

daparojo said:

Therefore Scenario 2 would be better per month, even though they would receive a lower lump sum i.e 10 k less at Scenario 2 - (£10000 / £650 (difference between Scenario 1 / 2) = Survive  after 15 years  to benefit from Scenario 2?

The lump sum is tax-free, the pension is taxable.

If a basic rate taxpayer, it would take just over 19 years to benefit from scenario 2 (ignoring inflation uplifts on the pension and returns on lump sum).

(£10000 / 650) / 0.8 = 19.23

If in typical health, she will have a life expectancy of a bit under 30 years.

Scarum

Just checked statement and mine has been updated as well.  Am I missing something but which date does the statement refer to?  Today, as in 2025-26?

CruisingSaver

Scarum said:

Just checked statement and mine has been updated as well.  Am I missing something but which date does the statement refer to?  Today, as in 2025-26?

The statements are updated to 31 March 2025, so 2024/25.

jeelz

I believe the survivor’s benefits in the 2015 scheme are less than in the 95 scheme which might be something you want to take into consideration.

hugheskevi

jeelz said:

I believe the survivor’s benefits in the 2015 scheme are less than in the 95 scheme which might be something you want to take into consideration.

The survivor pension in the 1995 scheme is 50% of the pension due from age 60, and the survivor pension in the 2015 scheme is 33.75% of the pension due at Normal Pension age, which is equal to the individual's State Pension age.

However, the annual pension from the 2015 scheme at Normal Pension age is likely to be higher than the 1995 scheme pension due at age 60 due to the higher accrual rate and no automatic lump sum, so there may well be little difference in the survivor benefit due for any given period of service.