Introduction

The NHS Pension Scheme is a well-earned benefit for the hard workers of the health service. But with three different parts of the scheme in operation, it’s not the easiest thing to understand. 

In this guide, we’ll break down exactly how membership of the NHS pension works, and what it might mean for your future retirement plans.

The guide focuses mainly on hospital doctors and dentists. GPs and GDPs can find a separate guide here.

The three different parts of the NHS Pension Scheme

The way in which your NHS pension works depends much on when you joined the scheme. That’s because there are three parts to the NHS pension – the old scheme, which has a 1995 section and a 2008 section, and the 2015 scheme.

For hospital doctors and dentists (also known as officers), the 1995 and 2008 sections predominantly pay a final salary pension, whereas the 2015 scheme is a career average (CARE) scheme.

For GPs and General Dental Practitioners, all parts of the schemes are CARE schemes.

Both these types of pension are known as ‘defined benefit’ schemes, because they promise to pay a pre-agreed income in your retirement.

In the final salary sections of the scheme, that pre-agreed income is calculated based on how much you’re earning when you finish work. In the career average scheme, it’s based on average earnings across your NHS employment.

Knowing which part of the NHS Pension Scheme you are in is key to understanding your benefits and planning your retirement. There’s some guidance below, but if you’d like personal advice on the matter, you can book an appointment with a Wesleyan Financial Services Consultant  – an expert in the medical sector and the NHS Pension Scheme.

Which section of the NHS Pension Scheme are you in?

The 1995 section of the NHS Pension Scheme applies to members who joined the scheme before 1st April 2008. The 2008 scheme covers members who joined the scheme after this date, but before the 1st April 2015 (unless you chose to move from the 1995 section to the 2008 section when it launched).

Anyone who joined the NHS Pension Scheme on or after 1st April 2015, or who decides to join in the future, will be enrolled in the 2015 scheme.

So far, so simple. But many people who were in the 1995 and 2008 sections have since been moved into the 2015 scheme – unless their pensions were protected due to them being close to pensionable age.

  • Members who were within 10 years of retirement as at 1st April 2012 received full protection and can remain in their current section until they retire or leave the scheme.
  • Members who were more than 10 years, but less than 13 years and 5 months from retirement on 1st April 2012 were entitled to tapered protection. This meant their move to the 2015 scheme was delayed to a later date.
  • Any members who were more than 13 years and 5 months from retirement on 1st April 2012 received no protection. They were therefore moved to the 2015 scheme as soon as it was launched.

The McCloud judgement

Complicating matters further, a recent ruling known as the McCloud judgement deemed these protections to be discriminatory against younger members. 

As a result, members who were in service before 31st March 2012 and on or after 1st April 2015 (including those who’ve taken their pension already) will get to choose which scheme (the legacy scheme or the reformed 2015 scheme), they wish to receive benefits from for the remedy period from April 2015 to April 2022.

The members covered by the consultation include those who have accessed benefits since April 2015 and deferred members who have not had a disqualifying break.

For many of the affected members who were moved into the 2015 scheme, moving back into the 1995 or 2008 section of the scheme may yield better benefits  – but might also mean paying more tax. Members who didn’t move, meanwhile, may now be able to move to the 2015 scheme. 

Following consultation, it’s been decided that members will be asked to make their choice when they access their benefits. This approach, known as ‘Deferred Choice Underpin (DCU)’, allows members to make a choice based on their actual career and a known retirement date.

For support on the McCloud judgement and DCU, book an appointment with a Wesleyan Financial Services Consultant.

How NHS pension contributions work

When you start working for the NHS, you automatically gain membership to the NHS Pension Scheme. The scheme is voluntary though, so you can opt out at any time.

If you choose to remain in the scheme, you’ll pay a set contribution to your pension each month, which is automatically taken from your salary. The amount you have to contribute is dictated by how much you earn, starting at 5% for the lowest-earning bracket (5.2% in Scotland), and rising to 14.5% for the highest earners (14.7% in Scotland).

Your employer contributes to your pension too. Currently they are obliged to contribute 20.68% of your salary (20.9% in Scotland) regardless of what salary bracket you’re in, or which part of the pension scheme you’re in.

The contribution rates, shown in full in the table below, have been fixed until 31st March 2022. They may be subject to change thereafter.

England and Wales NHS pension contributions
Salary Range
Your contribution (before tax relief)
Employer’s contribution
£0 - £15,431.99
5%
20.68%
£15,432 - £21,477
5.6%
20.68%
£21,478 - £26,823
7.1%
20.68%
£26,824 - £47,845
9.3%
20.68%
£47,846 - £70,630
12.5%
20.68%
£70,631 - £111,376
13.5%
20.68%
£111,377 +
14.5%
20.68%
Scotland NHS pension contributions
Salary Range
Your contribution (before tax relief)
Employer’s contribution
£0 - £18,936
5.2%
20.9%
£18,937 - 23,228
5.8%
20.9%
£23,229 - £28,891
7.3%
20.9%
£28,892 - £56,266
9.5%
20.9%
£56,267 - £79,801
12.7%
20.9%
£79,802 - £117,960
13.7%
20.9%
£117,961 +
14.7%
20.9%

How much your NHS pension might pay

The NHS pension is a defined benefit scheme. That means regardless of how much you accrue, your pension income is guaranteed to a certain level, as calculated by a formula.

That formula is slightly different depending on which part of the pension scheme you’re in, and what kind of role you hold.

Hospital doctors and dentists (officers) can see how their pensions are calculated in the information below. If you’re a GP or GDP (practitioners), you can see how your pension works here.

1995 section

If you’re an officer in the 1995 section, your pension is usually calculated as 1/80th of your final salary (the greater of your salary for the last 365 days or the best of your last 3 years’ pensionable pay), multiplied by the number of years you’ve been in the scheme.

The table below shows how much a hospital doctor or dentist might receive each year, based on this calculation.

Pension a doctor might get when they retire (1995 section), based on final salary and years spent in scheme
 
£20k salary
£30k salary
£40k salary
£50k salary
£60k salary
£80k salary
£100k salary
10 yrs
£2,500
£3,750
£5,000
£6,250
£7,500
£10,000
£12,500
20 yrs
£5,000
£7,500
£10,000
£12,500
£15,000
£20,000
£25,000
30 yrs
£7,500
£11,250
£15,000
£18,750
£22,500
£30,000
£37,500
40 yrs
£10,000
£15,000
£20,000
£25,000
£30,000
£40,000
£50,000

In addition, you will also get a lump sum, equivalent to three times your annual pension. If you want, you can give up some of your pension in exchange for a higher lump sum up to 25% of the notional fund value. If the lump sum is within 25% of your remaining lifetime allowance, it will be paid tax free.

2008 section

If you are in the 2008 section, you will receive a pension based on 1/60th of your ‘reckonable pay’ for each year you have been a member of the NHS Pension Scheme.

Reckonable pay is the average of the best three consecutive years’ pensionable pay received over the last 10 years before retirement.

You can usually take up to 25% of the notional fund value as a lump sum, but you would receive a reduced pension if you did so. If the lump sum is within 25% of your remaining lifetime allowance, it will be paid tax free.

The table below shows how much annual pension a hospital doctor or dentist might get if retiring at the normal retirement age, without taking a lump sum.

Pension a doctor might get when they retire (2008 section), based on reckonable pay (RP) and years spent in scheme
 
£20k RP
£30k RP
£40k RP
£50k RP
£60k RP
£80k RP
£100k RP
10 yrs
£3,333
£5,000
£6,667
£8,333
£10,000
£13,333
£16,667
20 yrs
£6,667
£10,000
£13,333
£16,667
£20,000
£26,667
£33,333
30 yrs
£10,000
£15,000
£20,000
£25,000
£30,000
£40,000
£50,000
40 yrs
£13,333
£20,000
£26,667
£33,333
£40,000
£53,333
£66,667

2015 scheme

The 2015 scheme is a career average scheme, based on 1/54th of your pensionable earnings each year. It’s calculated the same way for both hospital doctors and dentists, and GPs and GDPs.

Here’s how it works. Let’s say you earn £25,000 in your first year of service. Your pension for that year would be 1/54th of £25,000 = £463.

This ‘year one pot’ gets revalued each year in line with inflation - so by the time you come to retire, it could be worth considerably more.

Meanwhile, you effectively continue to earn a new pension pot each year. If your salary goes up to £30,000 in year two, you’ll put aside a pension of £555 that year – which again will be revalued every year.

When the time comes for you to retire, all your revalued pots of money are added together to calculate your final pension.

There’s no automatic lump sum entitlement, but you may be able to take one in exchange for some of your annual pension. Any benefits you built up in the previous sections, prior to the transition to the 2015 section, are preserved.

Frequently asked questions

  • At what age can I take my NHS pension? 

    There’s a ‘normal pension age’ (NPA) at which you can take your pension without any loss or reduction in benefits. Unsurprisingly, the NPA is different depending on which section of the NHS pension you’re in.

    If you’re in the 1995 section, the normal pension age is 60. In the 2008 section, normal pension age is 65. In the 2015 section, the NPA is the same as your state pension age (or 65 if your state pension age is lower). 

    There is an option to retire early and take your pension at 55 (the minimum pension age), but this usually means a reduction in benefits, as your pension would need to pay out over a longer period. There are exceptions though. Some members of the 1995 section (including nurses and mental health officers) can take benefits at 55 without penalty, and others can leave at 50 if they had membership between 31st March 2000 and 5th April 2006.

    Whatever age you take your pension at, you’ll need to complete and return an AW8 form to your employer, three months before your retirement date, to ensure your NHS pension benefits are paid on time.

  • Can I take my pension and keep on working?

    Yes, you can – and there are a number of options in place to help you change the way you work for the NHS while starting to take some of your pension benefits. These initiatives include ‘stepping down’ (reducing your level of responsibility), ‘winding down’ (reducing the number of hours you work) and even the option to ‘retire and return’.

    Remember though, you can’t access any pension benefits before the age of 55 – and the options available to you when you do approach that minimum pension age will depend on which section of the NHS scheme you belong to.  

    Note that if you take benefits from the 1995 section, you can’t rejoin the scheme or continue to build benefits in the 2015 scheme. There are also restrictions on returning to work.

    Members must have a clean 24-hour break to take full benefits. If the benefits are from the 1995 section, you can’t work more than 16 hours a week for the first month - otherwise the pension will stop (this 16-hour rule was temporarily suspended due to COVID 19).

  • What happens if I leave the NHS and then re-join?

    If you take a break in service, the scheme you fall under when you return will depend on the section of the scheme you left, how long you’ve been away and the level of protection you have.

    If you leave the 1995 or 2008 scheme, you can return to the same section of the scheme if:

    • Your break in service was no longer than 5 years
    • You qualify for either full or tapered protection

    If you’re not entitled to any protection, your tapered protection has expired or your break lasted longer than 5 years, you’ll rejoin the pension scheme in the 2015 section. 

    If you leave the 2015 scheme, but rejoin within 5 years, your old benefits will be linked to any you build up in the future. This means your benefits should rise each year to cover inflation, thanks to a process referred to as revaluation.

    Your pensions won’t get linked in this way if you return to the NHS after a break of more than 5 years. 

    If you’re thinking of taking a break from service, you can find out how to go about it via the NHS Pension Members’ Hub at www.nhsbsa.nhs.uk/member-hub.

  • Can I opt out of the NHS Pension Scheme altogether?

    Yes, the NHS Pension Scheme is entirely optional, and you can opt out at any time. There are various ways in which you can do this, but it’s always worth thinking carefully about the benefits you might be giving up.

    If you’ve already built up two or more years of benefits under the scheme before you choose to opt out, you’ll be treated as a deferred member, the same as if you’d left the NHS altogether.

    Deferred benefits will continue to increase each year in line with inflation, and will be paid from your normal pension age.

  • How can I increase my NHS pension benefits?

    There are a number of ways you can increase your benefits, or at least change the way you receive them. In the 1995 and 2008 sections, you can buy Additional Pension in multiples of £250 up to a maximum of £5,000 and make Additional Voluntary Contributions (AVCs).

    In the 2015 scheme, you can buy up to £6,500 (£6,750 in Scotland) in Additional Pension, and AVCs can again be made. In this scheme, you also have the option to buy out your early retirement reduction. 

    To learn more about Additional Pension and AVCs, take a look at our guide to NHS pension benefits. For more on early retirement reduction buy out (ERRBO), head to our piece on NHS pension and early retirement.

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