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  • FIRST POST
    • Bye chickpea
    • By Bye chickpea 9th Feb 18, 10:18 PM
    • 3Posts
    • 1Thanks
    Bye chickpea
    Defer or not?
    • #1
    • 9th Feb 18, 10:18 PM
    Defer or not? 9th Feb 18 at 10:18 PM
    Hi I am on the 1995 NHS scheme and will turn 55 in May. I am hoping to take early retirement with a 25% reduction in my small pension as I am returning to my country of origin. I don't need the money right now so is there any advantage to deferring it or should I take it and invest the lump sum?
Page 1
    • ermine
    • By ermine 9th Feb 18, 10:56 PM
    • 661 Posts
    • 985 Thanks
    ermine
    • #2
    • 9th Feb 18, 10:56 PM
    • #2
    • 9th Feb 18, 10:56 PM
    Hi I am on the 1995 NHS scheme and will turn 55 in May. I am hoping to take early retirement with a 25% reduction in my small pension as I am returning to my country of origin. I don't need the money right now so is there any advantage to deferring it or should I take it and invest the lump sum?
    Originally posted by Bye chickpea
    Surely not taking early retirement and the actuarial hit is a better idea, leave it deferred.

    Appreciated you might feel that the pound will tank relative to the currency of your old country, but the actuarial reduction will probably dwarf it. If you don't need the money don't take it early!
    • Dazed and confused
    • By Dazed and confused 9th Feb 18, 10:56 PM
    • 2,564 Posts
    • 1,231 Thanks
    Dazed and confused
    • #3
    • 9th Feb 18, 10:56 PM
    • #3
    • 9th Feb 18, 10:56 PM
    Not sure you've thought it through before posting!

    You say you're hoping to take early retirement with a 25% reduction in my small pension

    Then you say I don't need the money right now.

    If you don't need the money why are you hoping to take it with a 25% reduction???
    • Bye chickpea
    • By Bye chickpea 10th Feb 18, 8:42 AM
    • 3 Posts
    • 1 Thanks
    Bye chickpea
    • #4
    • 10th Feb 18, 8:42 AM
    • #4
    • 10th Feb 18, 8:42 AM
    Thanks sometimes it helps to think out loud! I am on a high salary banding at the moment with a final salary link thats why I thought of retiring now. This compared to just resigning now, and at some point work at a lower banding in the NHS then my final salary link and pension will be lower??
    • ermine
    • By ermine 10th Feb 18, 9:07 AM
    • 661 Posts
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    ermine
    • #5
    • 10th Feb 18, 9:07 AM
    • #5
    • 10th Feb 18, 9:07 AM
    This compared to just resigning now, and at some point work at a lower banding in the NHS then my final salary link and pension will be lower??
    Originally posted by Bye chickpea
    I think this is something you really need to ask the NHS pension scheme. If you leave, setting your pension deferred, then your FSP will be x years times your salary on leaving (or more likely the best of the last 3 years). You need to ask your pension people the question whether if you leave and rejoin later the service is considered continuous or as a new period of employment with a separate FSP. if the letter case, you will have a second NHS pension of y years times your (lower) salary on leaving the second employment.

    It seems a bit tough and arbitrary if two people come to the NHS to work at 55 and they both join the pension that person A, who has previous service on a high final salary takes a big retrospective hit to a pension built up in a previous employment whereas person B who has no previous employment doesn't take this sort of hit.

    If you read this for instance it states

    Welcome to the guide for the 1995/2008 NHS Pension Scheme for England and Wales.
    This Scheme closed with effect from 1 April 2015 except for some members entitled to continue in this Scheme through !!!8216;Protection!!!8217; arrangements. On 1 April 2015 a new NHS Pension Scheme was introduced.
    This new Scheme covers all former members of the 1995/2008 Scheme not eligible to continue in that Scheme as well as new NHS employees on or after 1 April 2015. To determine which Scheme you are eligible for please use the Member Identifier available on the home page of our website at:
    www.nhsbsa.nhs.uk/Pensions
    which seems to imply to me that you won't even have the option to rejoin the 1995 scheme.

    The implications of what you are thinking of doing a serious enough that you need to get a handle on this, preferably from people who know how the NHS pension works. However, drawing the pension early when you don't need the money sounds like a very bad idea if you will be working again in the UK, because you will pay tax on the pension income, effectively it reduces your personal allowance by the amount of the pension. So not only will you take an actuarial reduction, but you will then get to pay more tax if you rejoin the NHS unless you are part-time enough that your pension income + future NHS salary is below about 11.5k

    Questions to ask are:

    if you resign, leaving your pension deferred, but come back after some time, which NHS pension would you join

    and

    You have entitlement on the 1995 scheme. If you come back and rejoin on the 2015 scheme, are the pensions merged as far as determining your final salary?

    If you read section 20 about rejoining

    Rejoining this Scheme before retirement If you change jobs and have less than a year's break you will normally, depending on your age, be able to
    rejoin the same section of the Scheme.
    If you are eligible to rejoin the same section of this Scheme in which you have deferred benefits, after a break of 12 months or more, your benefits at retirement will be worked out in whichever of the following two ways gives the highest financial outcome for you:


    your periods of membership will be added together and your total membership and final year's pensionable pay (or reckonable pay) will be used to work out your benefits; or


    the benefits you have earned for each period of membership will be worked out separately, re- valued then added together.
    Which would seem to imply that the revaluation you fear will not apply. Ask them.
    Last edited by ermine; 10-02-2018 at 9:14 AM.
    • TARDIS
    • By TARDIS 10th Feb 18, 9:34 AM
    • 109 Posts
    • 79 Thanks
    TARDIS
    • #6
    • 10th Feb 18, 9:34 AM
    • #6
    • 10th Feb 18, 9:34 AM
    Do check with your employer's pension officer if you have one, but my understanding is:
    1995 scheme is based on the best of the last three years salary
    You can leave and rejoin the same scheme ie 1995 if rejoin within 5 years

    Have you read this:
    https://www.nhsbsa.nhs.uk/sites/default/files/2017-11/Leaving%20Early%20and%20Transferring%20Out%20Guide %20%28V15%29%20-%2011.2017.pdf
    • crv1963
    • By crv1963 10th Feb 18, 9:37 AM
    • 287 Posts
    • 694 Thanks
    crv1963
    • #7
    • 10th Feb 18, 9:37 AM
    • #7
    • 10th Feb 18, 9:37 AM
    Don't retire resign.


    If you leave the pension deferred until your scheme retirement age of 60 (unless you are "special classes" which makes it 55) you get no reduction in pension at all. Also if you re-join the NHS within 5 years of leaving you re-join the 1995 section if it is after 5 years you are no longer eligible to re-join the 1995 section but must go on the 2015 section. Although you won't lose the pension rights including TFLS on what you already have earned.


    If you re-join on a lower banding your contributions ie pension so far is preserved as it is now and new banding accrual is added at the new band rate.


    So for example you may have the following on your forecast in years to come:-


    Pension- **years ***days at Band 8a 47000pa= X amount


    Pension- *years ***days at Band 6 35550 pa= Y amount


    Total pension is X + Y = Z pension with lower lump sum


    or Total pension is X + Y = Z pension with increased lump sum.


    If you retire and then try to return to the NHS your future earnings will be limited to your pension and new NHS earnings not exceeding your retiring NHS salary.


    To work out what you could earn if you take your pension before 60 you do the following;-


    retiring salary= x amount minus your pension (always calculated as the maximum possible annual income regardless of whether you take the smaller income/ larger lump sum or not) the total left is the maximum amount you can earn directly from the NHS after retirement.


    Hope this helps you with your figures!
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • Bye chickpea
    • By Bye chickpea 14th Feb 18, 9:54 PM
    • 3 Posts
    • 1 Thanks
    Bye chickpea
    • #8
    • 14th Feb 18, 9:54 PM
    • #8
    • 14th Feb 18, 9:54 PM
    Thank you! Really helpful to clarify my thinking.... I now know what I have to do!
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