Introduction to the NHS Pension Scheme
When you start working for the NHS you will automatically be included in the NHS Pension Scheme. The scheme is voluntary, so you can choose to opt-out if you wish.
The amount you pay into your pension is dependent on how much you earn and the current contribution rates are between 5% and 14.5%. Your rate is determined on your full-time equivalent pensionable pay.
Your contributions are deducted from your gross pay which means less of your income is taxable. This in effect means that your actual contribution taking into account tax relief is between 4% and 8.7%. Your employer on the other hand (from 1 April 2015) contributes 14.3%.
New NHS Pension Scheme 2015
From 1 April 2015 a new NHS pension scheme came into effect. Members working in the NHS should have received a leaflet in their payslips about the new scheme earlier in the year.
The new pension scheme reflects the changes that were negotiated and fought over between the government and the NHS trade unions back in 2011.
In 2011, union members took strike action over the initial government proposals for changes to public sector pensions. Following further negotiations, the government made significant changes to the proposals and the Proposed Final Agreement (PFA) for the NHS pension scheme was produced.
UNISON’s health service group executive agreed that this was the best that could be achieved through negotiation.
Since then, the NHS trade unions sought to ensure that the pension regulations for the new 2015 scheme reflected the wording of the PFA and that no changes that were not negotiated or originally agreed were included.
From 1 April 2015 members of the 1995 or 2008 sections of the NHS pension scheme without ‘full’ or ‘tapered protection’ moved to the new 2015 pension scheme [see Protection section below].
Some of the main features of the new scheme are:
- It is a type of defined benefit scheme which provides pension benefits based on a fixed formula.
- It is a Career Average Revalued Earnings (CARE) scheme, rather than a final salary schemewhere benefits are built up on the value of your pensionable earnings each year during your NHS career.
- The pension build up rate is 1/54th of pensionable earnings in each year with no limit on the amount of pensionable membership which can be built up.
- This 1/54th fraction is better than the current 1995 and 2008 Sections.
- Each year’s pension earned will increase every year in value by the Consumer Price Index (CPI) plus 1.5 % per year.
- The age at which benefits can be claimed without reduction for early payment (normal pension age (NPA)) is the same age as your State Pension Age (but cannot be lower than 65).
- Pension benefits already built up in the 1995 and 2008 sections will be retained and calculated by reference to your final pay at retirement. You will still need to retire from NHS employment in order to access your 1995 or 2008 section benefits. You will not be able to access your 2015 benefits without reduction for early payment until your normal pension age for the 2015 pension scheme.
UNISON has produced a PowerPoint presentation on the new scheme (see Resources below).
Protection is the arrangement under which certain members of the NHS Pension scheme will remain in their current section of the NHS Pension Scheme indefinitely or will move to the new scheme at a later date, depending on the form of protection they have.
If you were within 10 years of your NHS Pension Scheme Normal Pension Age – the age at which they can retire without a reduction in pension benefits – as at the 1 April 2012 you remain in the 1995 or 2008 Section until you retire or otherwise leave the scheme. For most 1995 Section members this means 50 or over (or 45 for Special Class and MHO members) and 55 for 2008 Section members.
If you were more than 10 years but less than 13 years and 5 months from your Normal Pension Age as at 1 April 2012 you are entitled to Tapered Protection’. This means you will move to the new 2015 scheme at a date later than 1 April 2015 but will ultimately have to move by no later than the 1 April 2022.
If you are a member of the 1995 or 2008 Section and were, at 1 April 2012, more than 13 years and 5 months away from your Normal Pension Age you will move to the new 2015 Scheme on 1 April 2015.
Changes to the NHS Pension Scheme that took place on 1 April 2015 have potential implications for anyone involved in a salary sacrifice scheme. If you are currently participating in a salary sacrifice scheme and are now in the new NHS Pension Scheme 2015 you should consider whether this is still in your best overall financial interest. Read UNISON’s briefing ‘Salary sacrifice arrangements and your NHS pension: advice for UNISON members’ (see Resources below) for more information.
How the UNISON pensions unit can help you
UNISON has a pensions unit dedicated to dealing with issues concerning our member’s pension schemes and rights. The pensions unit has two full-time officers plus secretarial support.
The unit will always do what it can to accommodate branch/regional requests for pension briefings and pension surgeriessubject to resource constraints.
Pensions casework can also be sent to the pensions unit via the usual case protocols.
Alan Fox leads on NHS pensions and can be contacted at email@example.com or 020 7121 5514.
Total Rewards Statements
All NHS staff are now entitled to a Total Reward Statement (TRS) each year. This will include an Annual Benefit Statement (ABS) for pension scheme members.
Your TRS will provide personalised information about the value of your employment package and includes details of your remuneration and benefits provided locally by your employer.
Your ABS will show the current value of your pension, plus your predicted pension at your Normal Pension Age if you are remaining in the 1995 Section.
You can view your statement online at www.totalrewardstatements.nhs.uk. You will need to register through the site and request an activation code to be able to view your personal statement.
State pension age calculator
The State Pension Age will increase to 66 from October 2020, 67 by 2028 and 68 by 2046.
You can check your State Pension Age and Normal Pension Age in the 2015 NHS Pension Scheme by going to www.gov.uk/calculate-state-pension.
Option to give up protection for 2008 Section members
If you are a member of the NHS pension scheme and are in the 2008 section with full or tapered protection, you should recently have received a letter from your employer asking whether you want to opt out of this protection and join the 2015 scheme instead, with effect from the 1 April 2015.
This is a one-off opportunity relating to your service from April 2015 only. It covers approximately 44,000 members.
You may receive more pension on your retirement by opting out of this protection and joining the 2015 scheme.
This is because the 2015 scheme has a better pension build up rate (i.e. 1/54th compared to your current 1/60th) and each year’s pension earned in the 2015 scheme increases each year by increases in the Consumer Prices Index (CPI), plus 1.5%.
This rate of increase is likely to be higher than your pay growth for at least the foreseeable future.
You are advised to read your letter very carefully and to make use of the information and comparison tool on the NHS Pensions website.
If you wish to transfer to the 2015 scheme you need to complete the form you have received to this effect and return it to NHS Pensions in the envelope provided, no later than Wednesday 30 September 2015.
- The NHS Pension Scheme is a voluntary pension scheme available to all NHS employees. Benefits are paid in addition to the basic state pension.
- The NHS Pension Scheme is for all full-time and part-time NHS employees.<
- Eligible employees are automatically included but they can opt-out.
- The scheme particulars are defined by statute and benefits are paid directly from contributions and taxes.
UNISON NHS Pensions Champion
Could you be a champion?
UNISON is looking for people who care about their NHS pension and who are interested in finding out more about it.
If that’s you, then why not become an NHS pensions champion for UNISON?
You don’t have to be a pensions expert. All you need is the interest, a willingness to learn and to be keen to share your knowledge with colleagues.
UNISON will do the rest. We will provide information and training as well as a regular newsletter to keep you up to date with everything about the NHS Pension Scheme.
And then you’ll be able to help your colleagues who have general questions about their NHS pension. And don’t worry, you are not expected to provide individual pensions advice, just
to help others find out more.
To find out more information email UNISON on firstname.lastname@example.org
If you want to boost your NHS Pension, have you considered paying into an AVC?
The NHS Pension Scheme is a good way to build up funds towards your retirement. Have you considered potentially boosting your retirement benefits with Additional Voluntary Contributions (AVC’s)?
AVC’s offer another tax efficient way to save for retirement. They run alongside your pension scheme, and are taken from your pay at the same time.
Prudential are one of the AVC providers to the NHS Pension Scheme and have produced this informative leafletwww.pru.co.uk/reasons-to-consider-avcs highlighting the reasons why you might want to increase your retirement savings.
An AVC is one of the options open to you to potentially increase your retirement benefits. Your scheme also provides a number of other options for increasing your NHS pension benefits. For more information please visitwww.nhsbsa.nhs.uk/member-hub/increasing-your-pension.
Please note that the value of your investment into an AVC can go down as well as up and it’s possible you could get back less than you put in
NHS Pension Scheme Q&A’s (England and Wales)
How can I check who I’ve nominated for a lump sum payment on my death?
Your nominations will be shown on your Annual Benefit Statement but in the event of any doubt you should contact NHS Pensions to check who you’ve nominated.
What are the reductions to my pension if I draw it early
If you draw your pension before your Normal Pension Age, the amount you have earned at that point will be subject to a reduction to reflect the fact that you will be receiving it for longer. The exact reduction will depend upon which scheme you are in. You can view these reduction factors here.
Can I take a tax-free cash sum from my pension?
Yes. If you are a member of the 1995 scheme you will receive a tax-free cash sum of three times your annual pension value and you can still claim more tax-free cash up to a maximum limit should you choose to. If you wish to claim more tax-free cash your pension value will however reduce by £1 for every £12 of extra tax-free cash that you choose to take.
Exchanging annual pension for tax-free cash is known as commutation.
If you are a member of the 2008 or 2015 schemes you can only claim a tax-free cash sum by commuting some of your pension.
Your Annual Benefit Statement will tell you the maximum amount of tax-free cash that you can claim and what this would reduce your annual pension to.
If I die, is a lump sum paid out and if so, who to?
Yes, if you die whilst paying into the pension scheme a lump sum broadly equivalent to twice your pensionable pay will be paid out to whoever you’ve specified on a Form (known as DB2) for this purpose. You do not need to complete this Form if you wish for the lump sum to be paid to your spouse or civil partner.
I’m not sure what scheme I’m in – how do I find out?
Your Annual Benefit Statement will tell you which NHS Pension Scheme you are currently contributing to but if unsure you can always use NHS Pensions Member Identifier Tool.
How can I find out the current value of my pension?
You should have online access to an Annual Benefit Statement (ABS) where you can log-in and check the value of your pension when you want to. You can view this through Electronic Staff Records if you have access to this, or irrespective by registering through the ABS online portal
How much notice do I need to give to draw my pension?
It’s recommended that you give at least 4 months notice. You need to ask your employer for an AW8 Form and complete the parts you are required to before returning to your employer. They will then forward this Form to NHS Pensions.
Can I pay more into my pension and if so, what options do I have?
There are three potential options within the scheme for boosting your pension position. You can buy Additional Pension (AP), make Additional Voluntary Contributions (AVC’s) or if you are in the 2015 scheme, enter into an Early Retirement Reduction Buy Out (ERRBO) to reduce your Normal Pension Age. The appropriateness of each option will depend on what exactly you are trying to achieve.
Can I “cash” my pension in?
It is generally not possible to give up your pension in its entirety in return for a one off lump sum payment. One exception is if your pension is very small where you could qualify for a “trivial commutation “payment. More information.
Can I draw my pension early if I’m suffering ill-health?
If your employment contract is terminated on the grounds of medical capability you may be able to draw your pension without any early retirement reduction applying for early payment, irrespective of your age. You may also be able to get an enhancement to your pension if you are unable to undertake any regular employment. More information on the eligibility and entitlement conditions.