Question re NHS pension

[sunshinecloudsrain45]

Explaining this for a friend who’s not on mumsnet. If said friend decided to go from a band 7 to eg a band 2 role for a few years prior to retiring, how does that work with pension and lump sum? Does she still get the band 7 lump sum when she draws down her pension and any thoughts on how her pension would pan out etc Thanks

The hours you were on 30 won’t count as a full year. It is even more complicated if you have been part time.

@YinYangalang its not that complicated for the majority of those who have officer status. In 95 scheme the pension will just build up at 0.8 etc of the rate of someone who is full time. For example after 5 years, a full time person would have 5 years of calendar and reckonable membership, where someone working 0.8 would have 5 years of calendar membership but only 4 years of reckonable membership. It can get more complex if people chop and change their hours, but the majority don’t change hours regularly.

It is really complicated as many of us are in 2 schemes. I spent a lot of my last year doing calculations and there wasn’t any real help, but then I am the one most invested in finding out! I did attend a webinar which was useful though. I think the 2008 scheme calculates best of final 3 years whereas 95 is strictly the last year, in response to a previous query. Also would advise to think about max lump sum for tax reasons, if you’re continuing to work, as 25% of (theoretical) pension pot can be taken tax free. Obviously this reduces pension but could be useful depending on individual financial circumstances ( eg paying lump sum off mortgage) and having lower pension but lower tax burden too.

It’s best of the last three years.

@Nuffalready as was I. TRS breaks them down by scheme as does pension statements. Hopefully people are now being given their choice under McCloud when they are looking to retire. I retired last year and i will be waiting until Dec 26 before I can make my choice.

95 is the best of the last 3 years and 2008 is the average of the best 3 consecutive years out of the final 10 years prior to retirement. Last 10 years are revalued in line with CPI. Count back is from the date of retirement and not calendar or financial years.

How much lump sum to take is very personal and how much to take should be considered taking personal circumstances into account. It was something I had to think really hard about and it was difficult to get rid of the earworm telling me to take the maximum which was regularly spouted by colleagues without consideration of individual circumstances. The lump sum can be any figure between the min and max (as long as it’s divisible by 12). In the end I took neither minimum nor maximum, but a figure which was right for my circumstances. Tax is payable on interest from savings over a certain amount, unless invested in a tax free vehicle, so that needs to be considered as well.

the best of the current last 3 years or the best of the last 3 years whilst in the scheme before it changed ?

That is inaccurate on many levels not just the lump sum errors.
Depending on how old your friend is, she may have pension in both the 1995 & 2015 schemes. The 1995 scheme with normal retirement age of 60, is calculated on number of reckonable years and best year of your final 3 and on your FT salary. No one in the right mind would therefore drop to a band 2 from a band 7 in those 3 years leading to 60. It doesn’t matter that the scheme closed in 2022, that is how the calculations are made 🤷‍♀️
The 2015 scheme is different in that it is a career average scheme. And you definitely can swap some of your annual pension for lump sum in the 2015 scheme too.
OP Your friend needs to wrap her head around this, it’s vitally important, before she makes a massive financial blunder.

There’s an NHS facebook pensions group that has experts answering the questions rather than ‘mums’!

Same. I’m in Scotland and the NHS SPPA (Scottish public pensions agency) department is rubbish! You are on hold for hours and the people you speak to just advise you to seek (and pay for) independent financial advice.

My friend’s DH was a fireman and that department of the SPPA was brilliant with him. He got given charts showing all his options and what the outcomes would be.

It is sooooo complicated it’s utterly frustrating and depressing.

See my previous post for fuller explanation, but as the link remains to final salary for 95 scheme, its the best of the three years when you retire.

The scheme guides are a useful starting point. Pen-gage offers free webinars which are highly regarded and she has a helpful facebook page.

The best of the last three years in the immediate years before retirement. I’m going in 18 months so have double checked this several times!

so going down a grade in the last 3 years would be very foolhardy