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Original poster

NHS pension confusion - can anyone advise please ?

39 replies

mycatsanutter · 13/03/2023 21:32

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 ?

OP posts:
Original poster
mycatsanutter · 16/03/2023 18:53

@pbdr thank you , I'm so confused I don't know whether to opt out or not 😩

OP posts:
slamfightbrightlight · 16/03/2023 18:57

Why would you opt out?

Mangolist · 16/03/2023 19:01

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.

I don't understand the maths here! I am currently probably going to average £28k over 9 years in the NHS- what would that be pension wise?

Original poster
mycatsanutter · 16/03/2023 19:03

@slamfightbrightlight I'm 48 and on the lowest band so haven't got that many years to accrue much , but then lots of people say how good it is .

OP posts:
slamfightbrightlight · 16/03/2023 19:08

You could have 20 working years of contributions ahead of you!

mauvish · 16/03/2023 19:13

mycatsanutter · 16/03/2023 18:53

@pbdr thank you , I'm so confused I don't know whether to opt out or not 😩

Don't opt out! You would probably pay a lot more into a private pension to match the NHS one.

titchy · 16/03/2023 19:14

mycatsanutter · 16/03/2023 19:03

@slamfightbrightlight I'm 48 and on the lowest band so haven't got that many years to accrue much , but then lots of people say how good it is .

You've got 20 years - that's loads!!!!! You'd be a fool not to contribute. There is no better way you could save for a pension than a defined benefit scheme.

FrownedUpon · 16/03/2023 19:15

Don’t opt out! You’d be mad. Surely you’ve got 20 years left to accrue a decent pension. How will you fund your retirement if you opt out?

titchy · 16/03/2023 19:20

Say you earn an average of £20,000 for the next 20 years. That gives you a guaranteed, inflation-proof pension of £7,500 a year on top of your state pension of £10,000 a year.

It would cost in the region of £200,000 to buy an annuity that paid that. Can you save that much in the next 20 years?

Original poster
mycatsanutter · 16/03/2023 20:12

@titchy , thank you . Maybe you can answer my next question - with regards to my contributions . Is it a set amount based on my basic wage or would it vary depending on that months overtime . There are a lot of extra shifts so I won't ever be doing just my contracted hours . The paperwork just says a 5.1% contribution from myself.

OP posts:
pbdr · 16/03/2023 20:28

@Mangolist so it's calculated as £28k/54 x 9 = £4,666 per year from your state pension age until death (although with the revaluation of CPI +1.5% during your years of active service it'll end up being a bit more actually).

pbdr · 16/03/2023 20:39

mycatsanutter · 16/03/2023 18:53

@pbdr thank you , I'm so confused I don't know whether to opt out or not 😩

This is an easy one - don't. The NHS pension is spectacular value, you'd be throwing away about a quarter of your compensation package if you opted out. It would be an enormous financial mistake.

Mangolist · 16/03/2023 21:15

pbdr · 16/03/2023 20:28

@Mangolist so it's calculated as £28k/54 x 9 = £4,666 per year from your state pension age until death (although with the revaluation of CPI +1.5% during your years of active service it'll end up being a bit more actually).

Thanks!!! I got very confused !

titchy · 17/03/2023 09:30

mycatsanutter · 16/03/2023 20:12

@titchy , thank you . Maybe you can answer my next question - with regards to my contributions . Is it a set amount based on my basic wage or would it vary depending on that months overtime . There are a lot of extra shifts so I won't ever be doing just my contracted hours . The paperwork just says a 5.1% contribution from myself.

I don't know, but I would have thought that if you were paid overtime, rather than taking the time off, you would pay the 5.1% contribution on it. However I don't know how it would work in terms of years of service. If your contract is for 20 hours a week and you regularly do 10 hours overtime, then I'd assume that your service would be calculated on your average FTE being 30/37.

However if you work full time I don't know if it is possible to accrue more than one full time years service each year from overtime. You'd have to ask their pensions person.

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