2015 NHS Pension Scheme - ERRBO

I'm looking for a spot of advice about one of the new "features" of my pension scheme... the scheme advisors themselves have thus far been less than helpful; and other than a Similar Civil Service Pension thread at http://forums.moneysavingexpert.com/showthread.php?p=68165295 there doesn't appear to be any discussion about this on MSE, so here goes...

The NHS Pension scheme is a Defined Benefit Scheme, and is usually considered a pretty good one.

The 2015 version of this scheme came into force a few months ago. and one of the differences is that this version tracks an individual's STATE PENSION AGE rather than defining a specific retirement age (this was 60 or 65 with the previous versions of the scheme) and like all versions of the scheme, it imposes heavy actuarial reduction factors on your pension if you retire before this.

However, the scheme allows for Early Retirement Reduction Buy Out (ERRBO) - a mouthful of an acronym which basically translates to you voluntarily paying an extra percentage of your wage each year to reduce the actuarial reduction on that year's worth of pension contributions.

So, for example, if your State Retirement Age is 68, you can pay an extra few % of your salary per year and retire at 65 with no Actuarial reduction.

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I've been trying to work out if applying for ERRBO would actually be worth it for me.

Part of the problem is that there are no automated comparison tools, and the information about how it works is quite scattered (anyone I've talked to internally about it hasn't a clue how it works)... so I've been having to piece things together myself with numbers taken from the various files at http://www.nhsbsa.nhs.uk/Pensions/4017.aspx as well as the Actuarial Reduction tables at http://www.nhsbsa.nhs.uk/Documents/Pensions/2015_VER-ARER_factors_V3.pdf

The closest thing I've found to a working calculator for the pension scheme itself is at http://dh.firstactuarial.co.uk/default.aspx

Thus far, plugging in my numbers seems to suggest the following:
+ A basic Band 5 Salary currently tops out at £27901.
+ Each year in the scheme will give 1/54th of this, or £516.69 worth of extra yearly pension.
+ The pension tracks CPI plus 1.5%, which is (very roughly) an average of 4.21% per year over time.
+ So if I have 35 Years left to run before my SPA, this £516.69 would become (very approximately) around £2188.04

Normally if I retired 3 years early (65 instead of my SPA of 68) then this "amount added per year" figure would be actuarially reduced and become 2188.04*0.849 = £1857.64.

But by applying the maximum (3 Years) ERRBO, this actuarial reduction would be negated - an effective boost of £2188.04-£1857.64=£330.39.

That's yearly pension added, so the equivalent lump sum would work out at £330.39*12=£3964.72... so by paying for 3 Years worth of ERRBO now I would expect to get (very roughly) around £3964.72 back in 35 years time.

Given my age and tax bracket, paying for 3 Years worth of ERRBO would currently cost me £850.42 (NET) per year. So that's £850.42, after 35 years, becoming worth a lump sum of roughly £3964.72... or the equivalent return of around 4.5% yearly compound interest.

But to make matters more complicated, once you start a ERRBO agreement, it automatically carries forward into subsequent years and once you terminate it you can't restart it later. So the above is very likely the "ideal" situation - each subsequent year as I get closer and closer to retirement age, the benefit for me would get lower and lower due to that CPI-plus-1.5% tracker having less time to work its magic.

Would I be wrong in thinking that ERRBO is a bad deal if I'm the only one covering the extra contributions, considering that I could (very probably) make a greater return than 4.5%-per-year in a private Stocks and Shares ISA or SIPP?