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NHS Additional Pension

hiriskpaul
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NHS Additional Pension

#247908

Postby hiriskpaul » August 29th, 2019, 9:01 pm

I am trying to help my sister in law decide whether to purchase an NHS Additional Pension (AP). The AP currently works out at 6% for her. ie £500 AP costs about £8,300. She is reasonably comfortable with this, provided the AP increases with CPI. But the AP increases not by CPI, but by "Treasury Order". My concern here is that this sounds like a very good way for a future government to shaft those with APs. I realise that anything is possible, but does anyone know to what extent these "Treasury Orders" can be trusted to match CPI?

ursaminortaur
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Re: NHS Additional Pension

#247933

Postby ursaminortaur » August 29th, 2019, 10:54 pm

hiriskpaul wrote:I am trying to help my sister in law decide whether to purchase an NHS Additional Pension (AP). The AP currently works out at 6% for her. ie £500 AP costs about £8,300. She is reasonably comfortable with this, provided the AP increases with CPI. But the AP increases not by CPI, but by "Treasury Order". My concern here is that this sounds like a very good way for a future government to shaft those with APs. I realise that anything is possible, but does anyone know to what extent these "Treasury Orders" can be trusted to match CPI?


As far as I am aware a Treasury Order is just a statement of what the increase will be under the current statute terms which at present will be an increase with CPI.

See for instance this link about Treasury Orders and Civil service pension increases

https://www.civilservicepensionscheme.org.uk/members/annual-review-of-pensions-in-payment/

Pensions in payment (the pension that you receive each month) are reviewed annually in line with Treasury Orders. This review is called the annual Pensions Increase (PI) and takes effect on the Monday following 6 April each year. Therefore, this year, the PI takes effect from Monday 8 April.

The Treasury Order takes account of the previous September’s Consumer Prices Index (CPI) figure to determine what the adjustment will be. If the CPI shows an increase in prices from one September to the next, Civil Service Pensions in payment are usually increased the following April to reflect this.

If CPI shows that prices have fallen, or remained at the same level, then no increase will usually be applied. As CPI at September 2018 was 2.4%, the Treasury Order has confirmed that that a 2.4% increase will be paid to Civil Service Pensions in payment this year.


This would apply to the main DB pension as well as any additional pension.

Public sector pensions are governed by statute rather than contract and the wording of the statute allowed the government to make the change from RPI to CPI. If the Government came up with some new index then presumably they could using the same procedure to switch to that. But again that wouldn't be something just affecting the additional pension but something which would also be applied to the main pension.

DrBunsenHoneydew
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Re: NHS Additional Pension

#248101

Postby DrBunsenHoneydew » August 30th, 2019, 3:46 pm

hiriskpaul wrote:I am trying to help my sister in law decide whether to purchase an NHS Additional Pension (AP). The AP currently works out at 6% for her. ie £500 AP costs about £8,300. She is reasonably comfortable with this, provided the AP increases with CPI. But the AP increases not by CPI, but by "Treasury Order". My concern here is that this sounds like a very good way for a future government to shaft those with APs. I realise that anything is possible, but does anyone know to what extent these "Treasury Orders" can be trusted to match CPI?

I'm an NHS pensioner with NHS Additional Pension. Both my basic NHS pension and the AP get Treasury Order uplifts each April, currently based on Sept CPI, just as outlined by ursaminortaur for the Civil Service scheme. No guarantee that won't change in future.

hiriskpaul
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Re: NHS Additional Pension

#248192

Postby hiriskpaul » August 30th, 2019, 9:21 pm

Thanks for the helpful replies. On the whole, the AP looks a reasonable deal then. An index linked annuity starting at age 66 (in 3 years time), paying 6%. It is impossible to get such a deal from DC pensions. There is clearly a risk that a future government will break the spirit of the deal, but it would seem unlikely that they would specifically target APs rather than all public sector pensions.

On the whole I am minded to recommend my sister in law goes ahead with this, but need to check all the small print. How on Earth most NHS staff navigate the absurd complexities of their pension schemes and make well informed decisions is beyond me.

Financially it seems to me that my sister in law should cut down her hours (if possible), as that means her existing accrued benefits should continue to grow faster than inflation. Otherwise she may end up having to stop work completely before reaching 66. 12 hour shifts maybe ok in your 20s to 40s, but they are killing my sister in law at 63.

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Re: NHS Additional Pension

#248916

Postby Bouleversee » September 3rd, 2019, 1:29 pm

DrBunsenHoneydew wrote:
hiriskpaul wrote:I am trying to help my sister in law decide whether to purchase an NHS Additional Pension (AP). The AP currently works out at 6% for her. ie £500 AP costs about £8,300. She is reasonably comfortable with this, provided the AP increases with CPI. But the AP increases not by CPI, but by "Treasury Order". My concern here is that this sounds like a very good way for a future government to shaft those with APs. I realise that anything is possible, but does anyone know to what extent these "Treasury Orders" can be trusted to match CPI?

I'm an NHS pensioner with NHS Additional Pension. Both my basic NHS pension and the AP get Treasury Order uplifts each April, currently based on Sept CPI, just as outlined by ursaminortaur for the Civil Service scheme. No guarantee that won't change in future.


Do you know if the state additional pension increases at the same rate? I seem to remember there was talk at one point of it not getting any uplift on that in future. CPI is lower than RPI, of course, and doesn't seem to correspond to the increases in anything I have to pay for.


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