NHS Pensions

The changes enable members who have 1995 Section benefits to return to NHS employment after retirement and build up further pension benefits in the 2015 Scheme. This brings those scheme members in line with the provisions already available to those in the 2008 and 2015 sections. You can now work as many hours as you choose straightaway – previously, members of the 1995 Section were limited to working 16 hours a week in the first month after retirement to avoid their pension payments being affected. As long as you have had a break of 24 hours from your previous job, you can move to a new employment contract and start building 2015 benefits immediately.

If you have Special Class status and take your pension, but return to work before you reach age 60, from April 2024 there are no restrictions on the amount you earn on your return. Following a consultation at the beginning of 2024 to which the RCM responded-the “abatement rules” were abolished.

Under the new changes, members with benefits in the 1995 and 2008 sections, who are currently non-pensionable because they have exceeded maximum service limits and had to stop contributing, will be allowed to join the 2015 Scheme. The age limit for 2015 Scheme membership is 75yrs and will still apply.

From 1 October 2023, the DHSC made it easier to take partial retirement, so you can claim your pension and work in a more flexible way without leaving your job. “Draw Down” (taking part of your pension benefits) is already possible for benefits earned in the 2008 Section or 2015 Scheme but from October 2023, will be also applied to those with 1995 section benefits. From the age of 55, you will be able to take between 20% and 100% (with a potential actuarial reduction for early access) of all your pension benefits in one or two drawdown payments without having to leave your current job. You don’t need to take a break or change your job and you can still continue to build benefits in the 2015 Scheme. You will however need to reduce your pensionable pay by 10% and members must take note of this.

On 1 April each year, 2015 Scheme pensions are reviewed to keep up with the rise in cost of living. The Scheme measures the cost of living using the Consumer Price Index (CPI) in the year before. CPI measures the overall change in consumer prices based on a representative basket of goods and services over time. 2015 Scheme pensions are reviewed using CPI, plus an additional 1.5%. This ensures the value of your pension will be above inflation. This is called ‘revaluation’ and it usually happens on 1 April, but from this year onwards it will happen on 6 April instead. The change will align the CPI used in pension benefit revaluation with the CPI used for working out the pension growth for annual allowance tax calculations. This means that the pension growth calculation will only consider growth in pension benefits above inflation.

On the 8^th September 2022, the Government published its final response to the pension contribution consultation in England and Wales. In response to the consultation the RCM agreed with the proposal to base the rate paid on the actual annual rate of pensionable pay, instead of the whole-time equivalent pay. For part-time workers this means you may pay less because your contribution rate will be based on how much you’re actually paid each year, rather than how much you would earn if you worked full time. You can download the RCM’S full response.  The Government in Scotland also consulted on similar changes you can read the RCM’s response to the Scottish Government consultation here.

The value of a members pension benefits won’t be affected by the changes to contributions – only the way contributions are calculated, and the amount members pay.

From April 2024 the new contribution structure will be fully implemented. The DHSC have agreed to change the salary ranges used to decide how much all members contribute in line with CPI or any annual increase to the Agenda for Change pay scales- whichever is the highest. This means that members who receive an increase in salary from a national pay award are less likely to move up a contribution tier and pay more in contributions.

This webinar focuses on the changes to the NHS pension schemes across the UK. From 1 April 2022 those in the NHS pension scheme will all be moved into the 2015 scheme.

Setting targets for retirement, looking at how much you’ve built up and what you’re building up, and potentially taking action to address any shortfalls.

The NHS Pension Scheme is a public service pension scheme, it is open to NHS workers aged between 16 and 75. It is a Defined Benefit scheme, this means there is a promise to pay pension benefits based on salary and length of service. Member contributions are tiered and currently (Nov 2021) 5% to 14.5% dependant on salary, employer contributions are currently 20.6% (2019). Contributions to the scheme are used to pay benefits. You can view member contribution rates here.

There are 1.6 million NHS workers in England and Wales, 80% of those workers are women and 40% work part time. The age demographics of those working in the NHS has changed over time, in 1955 16.1% of men working in the NHS were aged 60 or above and 19.8% of women were. In 2006 this had changed to 30.1% and 31.8% respectively.

The purpose of the NHS pension scheme is to provide valuable, competitive and secure guaranteed retirement benefit for all those working in the NHS. It also aims to support the recruitment and retention of staff and support longer working.

Because of pension reforms over the years there are different pension schemes in the NHS. Membership of the schemes will depend on age and date of joining. Certain occupations such as midwives, nurses and physiotherapists who joined the NHS before 6 March 1995 may have what is known as Special Class Status which means that they can retire at 55 with unreduced benefits (provided the last 5 years of membership is in one of the special classes).

In 2008 there were reforms to the scheme and existing members could choose (known as the Choice exercise) to move to the new scheme whilst keeping the same pension age (60 for most but 55 for special classes).

• Accrual rate = The proportion of your earnings you get as a pension for each year in the scheme.
• Pension is calculated by: Pensionable earnings divided by accrual rate times by number of years service.
• Both 1995 and 2008 schemes total membership cannot exceed 45 years. Minimum age of joining is 16.

• Provides an annual pension worth 1/80th of the best of the last three years (final salary)
• A tax free lump sum 3x pension.
• A normal pension age of 60. Minimum pension age 55.

You can see detailed information about the 1995 and 2008 schemes here.

• Provides an annual pension worth 1/60th of reckonable pay per year (final salary)
• The option to exchange part of pension for cash at retirement to a limit
• A normal Pension age of 65. Minimum pension age 55.

You can see detailed information about the 1995 and 2008 schemes here.

This reviewed the financial sustainability of public sector pension schemes, changes in life expectancy and fairness between lower and higher earners.

The report contained a series of recommendations for public sector pension schemes:

• Pensions should be based on Career Average Revalued Earnings (rather than final salary as previous schemes)
• Normal Pension Age should be in line with State Pension Age,
• There should be :
• A clear cost ceiling and stabilisers
• Independent oversight and governance
• A legal framework
• Commonality across the public services.

The Public Service Pension Act 2013 put in place the legal framework, NHS Pension scheme regulations, a governance framework, a Pension Board, the Pension Scheme Advisory Board and a technical advisory group. The reformed scheme was introduced on 1 April 2015.

• Provides an annual pension worth 1/54 of each years pensionable earnings (Career average Revalued)
• The option to exchange part of the pension for a lump sum
• Pension age that is equal to the state pension age. You can find out your current state pension age here.

The 2015 reforms were introduced on the 1 April 2015 for all new starters and some existing pension scheme members. It was decided to provide protection to those within 10 years of their normal retirement age on 1 April 2012. For those who were between 10 and 14 years of their normal retirement aged tapered protection was given with this ending in February 2022.

In December 2018 Court of Appeal ruled that the protection to those closer to retirement when the 2015 scheme was introduced gave rise to unlawful discrimination. The 2015 scheme in itself was not found to be discriminatory. In order to remove the discrimination, the Government must ensure equal treatment from 1 April 2015 to 1 April 2022 (know as the remedy period). Affected scheme members will be able to choose to stay in their legacy schemes or move into the reformed scheme for the remedy period at retirement. The legal process that underpins this will be complete in October 2023

Where we are now?

Eligible pension scheme members do not have to take any action. The NHS pension agency will write to all individuals affected by the McCloud judgement. Those who have retired already or are to retire before 2023 will be given a retrospective choice after the legislation is passed. Individual scheme members will receive a letter about their circumstances with the options available to them.

From 1 April 2022-ALL members of the NHS Pension scheme will move into this scheme. Benefits accrued in existing 1995 and 2008 schemes will be frozen and preserved

NHS Employers have produced guidance on supporting staff to move to the 2015 NHS Pension Scheme from 1 April 2022. Including three key points for staff currently in the 1995 or 2008 scheme.

NHS Business Services Authority have published information about the changes, including an animation which can be found here

Please look at your individual pension so you understand you own situation and how this may affect you. You can access your Total Reward statement via your Trust ESR system.