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.
NHS Pension Scheme
Can part-time employees join the NHS Pension Scheme?
Yes, part-time employees can join the NHS Pension Scheme.
Does the NHS Pension Scheme replace the state pension scheme?
NHS Pension Scheme members will still receive a basic state pension in addition to the pension they accrue from their NHS service, if they have paid enough national insurance contributions to qualify for a basic state pension.
But they will not build up a state second pension for time they have been in the NHS Pension Scheme as this is effectively secured as part of the NHS Pension Scheme entitlement.
If I work for the NHS do I have to join the NHS Pension Scheme?
No, the NHS Pension Scheme is voluntary and you can choose to opt-out of it should you wish to.
The pension scheme benefits are very valuable, however, so you should make sure you are aware of what you would lose out on if you decided to opt-out.
What happens to my pension if I am TUPE transferred out of the NHS?
If your employment is transferred to an independent provider/private company then you should be able to remain a member of the NHS Pension Scheme courtesy of the Fair Deal pension protection that applies to staff transfers from public services.
You should check with your new employer that they have a Direction order from the Department of Health to enable this.
Why should I join the NHS Pension Scheme?
The benefits are very valuable and you have to ask yourself how else you will finance your retirement.
The employer contribution alone is broadly 14%, meaning you are effectively taking a pay cut if you opt out of the scheme.
Also, the scheme provides survivior benefits in the event of your death and protection against ill health, so the overall package of benefits is hard to replicate at the cost of what you pay into the NHS Pension Scheme.
Will I receive the full state pension?
The state department that administers the state pension, the Department for Work and Pensions (DWP), have said that fewer than half of those retiring between 2016 and 2020 will get the full amount of state pension and that “contracted-out” workers, most public service workers, will receive no more than £133 a week.
In response to a freedom of information request the DWP have said that only 45% of the 3.5 million people retiring between 2016 and 2020 will receive the full £150 (approximately) a week.
If you are a member of a public service pension scheme (i.e. local government, NHS Pension Schemes) you are currently contracted-out of the State Second Pension.
The current state pension system is split into two; the Basic State Pension and the State Second Pension. Public service workers currently only earn an entitlement to the basic element which is currently £115.95 a week for someone with a full 30 year National Insurance record.
You hence do not get a State Second Pension but do pay less National Insurance, as does your employer. More specifically you pay 1.4% less National Insurance on your weekly earnings between £155 and £770 and your employer saves 3.4% in comparison.
With effect from the 6 April 2016 this will stop and you will no longer be contracted-out. You will therefore pay a higher rate of National Insurance contributions than currently.
Ultimately if you are reasonably close to retirement you will not get what you may expect as your existing National Insurance record will determine the majority of your entitlement and you will simply pay more National Insurance for relatively little extra benefit. Younger workers will typically however accrue a bigger state pension over time than they would otherwise have done (albeit through paying more in National Insurance and having to wait longer to draw their state pension).