The Nuvos scheme has been used as an example to explain how your contributions are worked out.
The Nuvos pension has a normal scheme pension age of 65 with an accrual rate of 2.3% of your pensionable earnings.
Each year 2.3% of your earnings are added to your Nuvos pension. For example, one year of pensionable earnings of £20,000 will give an annual Nuvos pension of £460 at age 65.
Every year your accrued Nuvos pension is subject to a cost of living increase; which is 3% for April 2018
The chart below illustrates how a Nuvos pension builds up:
How your Nuvos pension is built up
The cost of living adjustment is assumed to be positive for this illustration.
When you access your Nuvos pension you have the option of exchanging some of your annual pension to create a tax free pension lump sum. You have the ability to increase your retirement income by buying Added Pension or making additional voluntary contributions (AVCs). Nuvos also provides a number of other benefits such as death benefits and ill health retirement.
The minimum pension age for Nuvos is 55. If you claim it before your normal pension age it will be reduced for early payment. If you take your Nuvos pension after your normal pension age of 65 a late payment supplement is added.
How your contributions are worked out
The contributions you pay in conjunction with your RCPS membership each month is between 4.6% and 8.05% of your pensionable earnings, the actual percentage being determined by which pay band applies to you.
Pensionable earnings include allowances that are classed as pensionable they do not include, for example, non-consolidated bonus payments. Full details of pensionable allowances are available from RCPS employers.
In order to work out the pay band that applies each month, your monthly pensionable earnings are multiplied by 12 to obtain the 'Annualised Earnings' figure. It is this figure which is then used for the purpose of assessing which pay band applies for your monthly pension contributions.
Because of this, your contribution rate may change from month to month if your pensionable earnings vary. This variation could be due to a backdated pay award or a pensionable bonus which may move you from one pay band to another for the month that this payment is made. The contribution rate should revert to the normal annualised earnings amount the following month, unless your pay rise takes you to the next contribution band.
The RCPS employee contribution estimator 2016 (Excel, 25KB) - opens in new window can be used to calculate what your monthly contribution might be.
The table below shows the contribution rates that are effective from April 2017.
|Annualised Pensionable Earnings||Nuvos %|
|Up to £15,000||4.60|
|£15,001 - £21,422||4.60|
|£21,423 - £51,005||5.45|
|£51,006 - £150,000||7.35|
|£150,001 and above||8.05|
Contributions are calculated as a percentage of your earnings and deducted from your gross pay before Income Tax is deducted, giving you tax relief. The actual amount of tax relief you receive will depend on your individual circumstances.
What does my employer pay?
In conjunction with your membership of the RCPS, your employer pays employer contributions at a level determined by the Government Actuary's Department (GAD).
The employer contribution rate is currently 26% for all members. The contributions can be likened to National Insurance (NI) contribution rates and the State Pension with no direct correlation between contribution rates and the RCPS pension.
© JSS 2018
Last updated: 15 Mar 2018