NHS pension confusion - can anyone advise please ?

mycatsanutter · 2023-03-13T21:32:24+00:00

I have done some googling and I'm still confused , everyone is so busy at work I haven't really had a chance to ask anyone . I have started a new job in the NHS which I absolutely love , obviously I have been enrolled into the 2015 pension scheme automatically. It states they will contribute a set amount but then also gives examples of a CARE pot scheme , so which is it or have I misunderstood , does anyone know please ?

pbdr · 13/03/2023 21:48

The NHS pension is a CARE scheme. That stands for Career Average Revalued Earnings, which essentially means that you will accumulate an annual pension based on your average earnings throughout your career and the number of years you work. There is no 'pot' of money, it's not that kind of pension. Rather you are accruing a promise from the government to pay you 1/54th of your average career earnings for every year that you worked as an annual pension from retirement until death.

So say for example (just to keep the numbers simple) you earned an average of £54k/year over a 30 year career, you would accrue an annual pension of £30000 (1/54th x £54k x 30 years). It actually works out as being more than that as every year you are in active service your accrued pension is increased by CPI+1.5%, so it continually increases in value above and beyond new accrual.

It's a fantastic pension, you're very fortunate to have access to it.

Softdough · 13/03/2023 21:50

It's a career average scheme rather than the old final salary scheme. The amount paid in is basically your subs for being in the scheme and pays for those drawing down their pension now. You should have someone at your trust who can help explain it, usually in payroll. Or you can contact the national nhs pension, but good luck with that. I left the nhs 2 years ago after 15 years, trying to get a pension estimate has been painful, to say the least!

Original poster

mycatsanutter · 13/03/2023 22:34

Thank you both , I understood the 1/54 as there was a leaflet explaining it but what has thrown me is the bit where it mentions an actual amount ' it says annual contribution paid by employer worth £xxxx'

OP posts:

PerfectYear321 · 13/03/2023 23:34

I know the NHS pension is as good as you can get these days but I can't get over the fact you have to wait until 70 to claim it. Isn't life expectancy 80? Seems a huge chunk of money to lock away every month while you're young and have loads of expenses/kids etc 😭just for 10 years of pension

Original poster

mycatsanutter · 14/03/2023 06:55

@PerfectYear321 didn't think of it like that ! But I'm not young tbh but also don't have a pension but have another financial old age plan . Do t know what to do really as a have took a pay cut to be happier at work .

OP posts:

mummabubs · 14/03/2023 06:57

pbdr · 13/03/2023 21:48

The NHS pension is a CARE scheme. That stands for Career Average Revalued Earnings, which essentially means that you will accumulate an annual pension based on your average earnings throughout your career and the number of years you work. There is no 'pot' of money, it's not that kind of pension. Rather you are accruing a promise from the government to pay you 1/54th of your average career earnings for every year that you worked as an annual pension from retirement until death.

So say for example (just to keep the numbers simple) you earned an average of £54k/year over a 30 year career, you would accrue an annual pension of £30000 (1/54th x £54k x 30 years). It actually works out as being more than that as every year you are in active service your accrued pension is increased by CPI+1.5%, so it continually increases in value above and beyond new accrual.

It's a fantastic pension, you're very fortunate to have access to it.

Thanks for this, as I'm also an NHS employee and the pension leaflets utterly confuse me! This is the clearest explanation I've seen of it.

BelindaBears · 14/03/2023 06:59

PerfectYear321 · 13/03/2023 23:34

I know the NHS pension is as good as you can get these days but I can't get over the fact you have to wait until 70 to claim it. Isn't life expectancy 80? Seems a huge chunk of money to lock away every month while you're young and have loads of expenses/kids etc 😭just for 10 years of pension

You can draw it at a reduced level at any age from from 55 and in full from 65 or your state pension age (highest of which is currently 68). Sure, not as generous as the old scheme but this is a bit of an exaggeration.

Original poster

mycatsanutter · 14/03/2023 07:06

@BelindaBears do you know why it would say an exact amount will be paid in every year as well as explaining the CARE scheme ?

OP posts:

PerfectYear321 · 14/03/2023 07:34

mycatsanutter · 14/03/2023 06:55

@PerfectYear321 didn't think of it like that ! But I'm not young tbh but also don't have a pension but have another financial old age plan . Do t know what to do really as a have took a pay cut to be happier at work .

I'm in the same boat. Only entered the scheme last year and not at the start of my career. My plan is that it's just part of a range of options for my future. There's no way I'll take a reduced pension earlier as it makes no sense for someone who's only got a few years of contributions. Hopefully I'll retire at maybe 60 and downsize/use savings/ do something part time etc to live until I can draw it along with the state pension at 70 or whatever age it will be by the time I get there. The good thing about the scheme is it's guaranteed and goes up with inflation each year. Also if you live to 100 you'll continue to be paid unlike other pension schemes where there's a finite pot of money.

Original poster

mycatsanutter · 14/03/2023 08:49

@PerfectYear321 can I ask when you do overtime does the amount that you contribute that month increase ?

OP posts:

PerfectYear321 · 14/03/2023 11:07

mycatsanutter · 14/03/2023 08:49

@PerfectYear321 can I ask when you do overtime does the amount that you contribute that month increase ?

I always ask for the time back rather than to be paid so I don't know the answer to that. Hopefully someone on the thread knows

America12 · 14/03/2023 11:39

PerfectYear321 · 13/03/2023 23:34

I know the NHS pension is as good as you can get these days but I can't get over the fact you have to wait until 70 to claim it. Isn't life expectancy 80? Seems a huge chunk of money to lock away every month while you're young and have loads of expenses/kids etc 😭just for 10 years of pension

You don't have to wait til 70 to claim it.

PerfectYear321 · 14/03/2023 11:43

America12 · 14/03/2023 11:39

You don't have to wait til 70 to claim it.

Show quote history

I've already explained what I mean by that

WiseUpJanetWeiss · 14/03/2023 19:43

Have you got your Total Reward Statement? It’s not as easy to understand as it should be but that clearly shows what benefits you have accrued to date and what it is worth as a pension.

The bit about employer’s contribution you can ignore really - I think they only tell you about that so it feels as though you’re getting something for nothing😀

Foreversearch · 14/03/2023 21:04

mycatsanutter · 14/03/2023 07:06

@BelindaBears do you know why it would say an exact amount will be paid in every year as well as explaining the CARE scheme ?

The reason the employers contribution is stated is so you know the value of the benefit you are receiving. A lot of public sector employees take the high % employer contributions as a given rather than realising they form part of their total reward package.

Foreversearch · 14/03/2023 21:11

WiseUpJanetWeiss · 14/03/2023 19:43

Have you got your Total Reward Statement? It’s not as easy to understand as it should be but that clearly shows what benefits you have accrued to date and what it is worth as a pension.

The bit about employer’s contribution you can ignore really - I think they only tell you about that so it feels as though you’re getting something for nothing😀

It’s so when you look for a job outside the public sector you know what salary and benefits you need to replace the pension. It can be shocking to many people to find out how much has to be paid in to a DC scheme to get the same level of benefits.

Decades ago the maximum a person could input to pensions was 15%. My manager was boasting about applying for jobs with a 10% increase in salary and I said I would want at least 20% as I would have to pay 15% into my pension and it still wouldn’t match the pension. He was shocked but looked into it and realised internal promotion was way better.

Original poster

mycatsanutter · 14/03/2023 22:25

@WiseUpJanetWeiss no I only started 2 weeks ago so don't have any statement.

OP posts:

Pythonesque · 14/03/2023 22:56

I think, not absolutely sure, that your pensionable income is based on standard hours only so overtime hours won't be pensioned (or part of the calculation of how much you pay). I had an idea that part-timers are supposed to have their hours pensioned up to full time hours and having just gone back into the NHS recently myself one of my jobs to do is to email payroll to clarify this, because I think my pensionable income should possibly be higher than quoted on my first payslip ...

Mossstitch · 14/03/2023 23:35

Extra hours worked means more pension is paid in👍 I took mine early after carefully considering the options so you don't have to wait til full retirement age. I now do bank shifts but only need to do a few a month as the pension pays for most of my bills. Once I get state pension I can choose to carry on or not.

Mossstitch · 14/03/2023 23:38

Not sure I made that clear but to clarify pension taken out of your wage is a percentage, I think my band is 9% now, so if you do more hours more is taken out but this all increases the amount you will be paid when you take eventually take it.

MucozadeOnLucozade · 14/03/2023 23:41

I worked for NHS ten years ago and put £2500 into a pension during that time. Can anyone work out what that would be a month come retirement age in say 25 years time?

Foreversearch · 15/03/2023 01:35

Pythonesque · 14/03/2023 22:56

I think, not absolutely sure, that your pensionable income is based on standard hours only so overtime hours won't be pensioned (or part of the calculation of how much you pay). I had an idea that part-timers are supposed to have their hours pensioned up to full time hours and having just gone back into the NHS recently myself one of my jobs to do is to email payroll to clarify this, because I think my pensionable income should possibly be higher than quoted on my first payslip ...

@Pythonesque additional hours up to full time should be pensionable and also count when calculating holiday pay. Definitely check as on another thread on MN suggests NHS are not doing the latter.

Foreversearch · 15/03/2023 01:38

MucozadeOnLucozade · 14/03/2023 23:41

I worked for NHS ten years ago and put £2500 into a pension during that time. Can anyone work out what that would be a month come retirement age in say 25 years time?

@MucozadeOnLucozade the amount you contributed does not correlate to your pension. You need to contact NHS pensions team and ask for a statement, you should have been receiving one each year.

WiseUpJanetWeiss · 15/03/2023 17:10

MucozadeOnLucozade · 14/03/2023 23:41

I worked for NHS ten years ago and put £2500 into a pension during that time. Can anyone work out what that would be a month come retirement age in say 25 years time?

It depends on how long you worked there, your pay, and which scheme you were in. The NHS scheme is a defined benefits scheme, not defined contributions.

pbdr · 15/03/2023 21:31

That is the one thing I most often see people get wrong about the NHS pension scheme; they think the amount that they, or their employer contributes determines how much pension they get. Your contribution is just the cost to you of being a member of the scheme, and the employer contribution is just how the scheme is funded. Those contributions do not go towards building up any pot/pension for you. Your pension accrues based on how much you earn and how many years you earn for.