NHS pensions and early retirement
Keen on the idea of early retirement? This guide will help you assess the options open to you under the NHS Pension Scheme.
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. If you have been an active member of the scheme since before 2015, then it's very likely that you belong to more than one 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 useful information below, but if you’d like personal guidance on your retirement plans, you can book an appointment with a Specialist Financial Adviser from Wesleyan Financial Services.
The McCloud judgement
When the 2015 CARE scheme was introduced, NHS pension members were automatically moved to the new scheme on 1st April 2015 unless they had full or tapered transitional protection.
These protections meant that those closest to retirement wouldn’t move scheme or would move later, between April 2015 and March 2022.
In December 2018, the Court of Appeal ruled that these protections discriminated against younger members of the Judicial and Firefighters schemes. In July 2019, the Government accepted that the ruling applied to all the reformed public sector schemes.
Changes to remove the discrimination from the NHS scheme, under what is known as the ‘McCloud judgement’, started coming into effect in April 2022.
The McCloud judgement will affect your membership if:
- You were a member on 31st March 2012 and on or after 1st April 2015.
- You left the Scheme after 31st March 2012 but returned within 5 years.
This includes members who have received benefits since 2015.
What the McCloud judgement means for you
On the 1st April 2022, the first steps to introduce the McCloud changes were introduced. These changes meant that:
- All affected members were returned to their legacy scheme, either the 1995 or 2008 section, for the remedy period.
- All affected members still contributing to the scheme were moved to the 2015 scheme.
When members come to take benefits, they will be asked which pension scheme they wish to receive benefits from for the ‘remedy period’ between 1st April 2015 and 31st March 2022.
For now, there's nothing you need to do, but if you'd like support on the McCloud Judgement, you can book an appointment with a Specialist Financial Adviser from Wesleyan Financial Services.
Which section(s) of the NHS Pension Scheme are you in?
If you joined before 1 April 2015, it is likely that you are a member of more than one section of the scheme. The sections you are a member of will depend on when you joined the scheme.
- If you joined the scheme before 1st April 2008 then you will have initially joined the 1995 section.
- If you joined between 1st April 2008 and 1st April 2015, then you initially joined 2008 section.
- If you joined after 1st April 2015 then you joined the 2015 scheme and will not be affected by the McCloud judgement
When the 2008 section was introduced, members of the 1995 section were given the opportunity to switch from the 1995 section to the 2008 section.
If you joined on or after 1st April 2012 but before the 1st April 2015, then you will have joined the 2008 scheme but then moved to the 2015 scheme on 1st April 2015. You will not be affected by the McCloud Judgement.
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.
Your employer contributes to your pension too. The current contribution rates can be seen in the table below:
|
Tier
|
Pensionable earnings (rounded down to the nearest pound)
|
Contribution rate from 1 April 2023
|
Employer’s contribution
|
|---|---|---|---|
|
1
|
£0 to £13,246
|
5.1%
|
20.68%
|
|
2
|
£13,247 to £17,673
|
5.7%
|
20.68%
|
|
3
|
£17,674 to £24,022
|
6.1%
|
20.68%
|
|
4
|
£24,023 to £25,146
|
6.8%
|
20.68%
|
|
5
|
£25,147 to £29,635
|
7.7%
|
20.68%
|
|
6
|
£29,636 to £30,638
|
8.8%
|
20.68%
|
|
7
|
£30,639 to £45,996
|
9.8%
|
20.68%
|
|
8
|
£45,997 to £51,708
|
10%
|
20.68%
|
|
9
|
£51,709 to £58,972
|
11.6%
|
20.68%
|
|
10
|
£58,973 to £75,632
|
12.5%
|
20.68%
|
|
11
|
£75,633 and above
|
13.5%
|
20.68%
|
Scotland NHS pension contributions
Scotland’s NHS pension contributions are currently unchanged, but a consultation is taking place which may impact them in the future. The current rates are shown in the table below:
|
Tier
|
Pensionable earnings band
|
Contribution rate for 2023/24
|
Employer’s contribution
|
|---|---|---|---|
|
1
|
Up to £21,614
|
5.2%
|
20.9%
|
|
2
|
£21,615 to £25,981
|
5.8%
|
20.9%
|
|
3
|
£25,982 to £32,914
|
7.3%
|
20.9%
|
|
4
|
£32,915 to £66,017
|
9.5%
|
20.9%
|
|
5
|
£66,018 to £92,423
|
12.7%
|
20.9%
|
|
6
|
£92,424 to £123,147
|
13.7%
|
20.9%
|
|
7
|
£123,148 and above
|
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.
|
|
£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.
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.
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.
|
|
£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.
Ready to discuss your retirement plans?
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’. Note that members must have a clean 24-hour break to take full benefits.
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.
-
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?
In the 2015 scheme, you can buy up to £6,500 (£6,750 in Scotland) in Additional Pension, and you can also make Additional Voluntary Contributions (AVCs). 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.
You might be interested in...
NHS pensions and the annual allowance
The annual allowance limits how much you can save into a pension each year without paying tax. Find out how it impacts your NHS pension.
Retirement planning guide for medics
Thinking about retirement from the health service? In this guide, we’ll look at some of the things you might want to consider before calling time on your career.