Is anyone clever with pensions, especially NHS ones?

[Relocatiorelocation]

I'm trying to work out how much my pension is worth as part of my package, should I ever choose to leave the NHS.

I'm B7, part time, so I pay in about 6.8%. My understanding is the NHS pay in 23%, so roughly 30% of my salary going in the pot. But as it's a defined benefits pension (I'm 2015 scale) does it really matter what goes in, that doesn't really impact what comes out does it?

I'm trying to work out what I'd need to save in another pension scheme to match the NHS. I have contacted pensions but there's a 6 week wait for a reply apparently. I've got a job offer in the private sector on the table, but the pension bit is confusing me.

If anyone got this far and understands my question thank you, any advice appreciated.

Afaik your nhs pension is calculated by looking at the best year or maybe couple of years within the last however many years before you left. So what goes in does matter

@QuebecBagnet that was definitely the case with the older pension, the new one is a career average so you get 1/54 of your pension for each year worked, based on your pensionable pay.
What I'm trying to work out is what that's actually worth....its giving me a headache.

youbare Correct that the old pension was best 3 of the last 10 - IIRC.

Go on ESR & run a pension report - mine tells me that if I left now I would get about £400 per year. 🤯

For each year you pay in, work out 1/54th of your pensionable salary (that's gross salary for most people, but if you do any salary sacrifice it'll be the amount after that). Add that up for all the years you pay in, and that's how much pension you get paid each year if you take it at your state pension age.

On a public sector DB scheme it makes no difference whatsoever to you what goes in, other than considering the effect in your pay packet. You're guaranteed a pension based on your salary and years served.

Obvs there is no guarantee at all with a private DC scheme - you get a pot of money at the end (your conts plus employer conts plus HMRC conts) and it's up to you to use it to buy a pension annuity, or draw down the amount. If that buys you a life of luxury or a life on the breadline is irrelevant to the scheme.

Log onto ESR and look at your Total Reward Statement.

Thank you all very much. I havent explained myself properly at all though, my mistake.

I can see what my pension will pay me through ESR. What I'm trying (and failing) to work out is what it's worth now, as part of my package. So if I wanted to match it what I'd need to pay in to a private pension or other employer pension.

So e.g I'm on about 48k full time equivalent. If I took a private sector job at 60k would the package in its entirety be comparable, or would the NHS still be better due to the good pension.

Does that make sense outside of my head?

Well work out how much extra pension between now and you staying till you were 65 on £48k.

Then find out what the total employee, employer and tax contributions on new role would be for however many years based on £60k. Then search annuity rates to see how much income using all that pension money would buy.

So what is higher:
Your NHS salary + employer pension contributions
or
Private salary + employer pension contributions
Also worth considering other benefits such as sick pay and annual leave entitlement to see which job is better overall.

I think you’ll find that after tax deductions you’ll be better off staying in the NHS.

Hmm, I would work on the basis of what your employers are currently contributing if I were you. The statutory pension contribution is 3%, so currently your employers are paying 20% more than that. Your statutory contribution is 5%, so not that dissimilar to what you're currently paying.

So to get 23% on your current (example) salary would be £11k, £60k would be commensurate.

Look at the hypothetical annuity cost in TRS and then work out how much you will build each year in a private pension and see if it compares.

my nhs pension would need a totally massive fund to give me an annuity the same as my pension

Ah I get it! In order to do that you need to know what your new employer will be contributing to your pension. And then you can do a compare and contrast.

Assuming you’re working full time (I know you’re not, but these are the figures you’ve given us):

For each year you pay in to your NHS pension, you earn an extra £48,000/54 per year every year once you have retired, so that’s £889 per year. If you live for 20 years after retiring then that one year of pension payments has bought you £17,778 in future pension payments.

The cost to you is 6.8% of your salary, so £3,264.

So that’s a gap of £14,500 which is added to your pension by the NHS and the government backing that comes with it.

If you’re working half time, just halve all the figures with a £ attached.

You might also want to take account the life insurance that you automatically get with your NHS job, and the cost of an income protection plan to replicate the generous sick pay package.

Thank you all very much, so from back of a fag packet calculations the private salary of 60k is roughly equivalent to my 48k NHS package. But then I'd need to factor in the huge amount of holidays, plus sick pay etc. So really it'd need to be edging closer to 70k to be commensurate.

It's quite easy to get dazzled by headline figures when you haven't got a good grasp of how pensions work 😳

Just checking TRS and my 2008 pension is payable at 65, my 2015 pension is payable at 68....I really hope it doesn't creep up much further or I'm not sure how many years I'll even get out of it.

In a defined benefit scheme, the contribution % is meaningless.

Don’t forget unless you intend to match your nhs pension you’ll pay higher tax on £60k so it’ll be higher than just the £11k shortfall, you need to work out what that would be gross.

£60k will be nowhere near enough.

You need to work out what pension you accrue after one year of employment (a PP has done it for you upthread.). Let’s pretend in one year you accrue £1,000 of annual pension.

Work out how much you and an employer would have to contribute into a defined contribution scheme in order to provide £1,000 annual income. This is the amount that would have to be provided (by you and your new employer) on top of any salary.

Also factor in the death in service benefit - how much would that cost in private insurance? Plus sick pay etc.

If you want to pay enough into a private pension to (hopefully) match what you would have been getting in the NHS, you're likely to be looking at more like £70k headline salary. That's to match your current package, not exceed it.

I've recently done the sums for a public sectorvs private sector job, and it's a big difference.

They don't call the nhs pension golden handcuffs for nothing!

Are you sure your contribution is 6.8%? Mine is higher and I'm Band 6 equivalent. I thought contribution was based on FTE pay not part time.

I hadn't heard that, but yes it really does feel like it! Not complaining though, at least I will get a pension.

If the accrual rate is 1/54, then if you earn £54k your pension under career average arrangement grows by £1k.

This pension will have a death benefit and spousal pension and is index linked. To buy a £1k annuity to cover this would cost well over £30k…probably more like £40k.

So, consider if you were in the orivate sector if the contributions from yourself and employer would equal £30-40k. How much would you have to pay of that to reach the figure? To be better off, after your employer had paid in and you have added enough yourself to hit £30-40k, you’d need to still have a higher salary than you do now post tax and pension contribution.

My DH did this kind of calculation a while ago. He needed a pay rise of about £25k to break even with his public sector job.

We are now pensioned on our pensionable pay not salary
So my % has gone down