NHS Pensions

NHS Pensions

From the 1^st April 2023, changes are being made to the NHS Pension scheme rules to enable NHS staff to work more flexibly up to and beyond retirement age.

Retire and Return

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, abatement rules currently apply to you. This means that if your post-retirement pay plus pension is more than your pre-retirement earnings, then your pension payments may be reduced (or ‘abated’). With these changes, members with Special Class status will still be subject to abatement until age 60 under normal circumstances. However, abatement is currently suspended until 31 March 2025.

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.

Partial Retirement

From 1 October 2023, the DHSC will also make 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.

The date your 2015 Scheme pension is reviewed is also changing

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.

You can read our response to the consultation here.

On 22 September, the government announced its NHS plan for winter and beyond in its publication Our Plan for Patients, which included some changes to the NHS Pension Scheme. It was confirmed that abatement and the 16-hour rules will continue to be suspended.

On 6 October, the official consultation outcome was published. DHSC intends to extend the temporary retire and return easements as follows:

• the 16-hour rule will be suspended to 31 March 2023, with further proposals for its permanent removal from 1 April 2023
• abatement of draw-down members of the 2008 section and 2015 scheme will be suspended to 31 March 2023
• abatement of Special class status members will be suspended to 31 March 2025

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.

The changes to the contribution structure will mean that higher earners will pay less, but some members will pay more each month. The RCM did not agree that pension contributions should be raised for any NHS staff particularly at a time when morale is at rock bottom, inflation is at an all-time high, and inadequate pay awards have meant that RCM members are worse off in real terms. To give members time to adjust the DHSC is phasing in the new contribution rates in two stages, starting on 1 October 2022 with further changes planned in 2023. The DHSC have agreed to change the salary ranges used to decide how much all members contribute in line with any annual increase to the Agenda for Change pay scales. 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.

In September 2022, some members in band 8a will be adversely affected by the implementation of the pay award at the same time as the introduction of the new contribution structure. You can read more about this with the full impact in our news story  here

The new contribution structure to be implemented on 1 October 2022 (phase 1) and further changes in 2023 (phase 2) is below:

The RCM is unable to give individual financial advice about pensions, this webpage includes a brief overview of NHS pensions along with links to relevant NHS pension agency briefings. The RCM is a member of the pension Scheme Advisory Board (SAB) which covers England and Wales and enables us to influence the scheme as a whole on behalf of our members.

SAB membership also includes other NHS trade unions, employer representatives, the Department of Health and advisors including actuaries, lawyers and auditors. The RCM is also a member of the SABs in Scotland and in Northern Ireland. The SABs aim to work in partnership to provide advice to the responsible authority on the desirability of changes to the scheme and also respond to policy issues or to proposed changes to the regulations governing the scheme.

RCM response to NHS pensions contribution consultation

We want to make clear in our response that changes to the NHS Pensions Scheme have an impact on the NHS workforce and these proposed changes are in the context of a maternity workforce that is exhausted and demoralised by years of pay freezes, pay stagnation, understaffing and underinvestment. Download full response and see news story.

RCM Pensionable Pay Guidance

The RCM has produced guidance on pensionable pay which can be found here.

RCM pension webinars

The RCM has held a series of virtual pension events and you can access the recordings below:

Changes to the NHS pension scheme

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.

Saving enough to stop work

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.

 Zoë Sadler is a qualified actuary with 26 years’ experience in the pensions industry. She is part of First Actuarial’s Financial Wellbeing team and worked at several other actuarial consultancies before joining First Actuarial in 2019.  Zoë is very enthusiastic about helping people to understand their pensions and wider benefits. 

Pensions update 7 March 2022

Your NHS pension:

Background Information

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.

Purpose of the scheme

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.

Sections

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).

Useful information

• 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.

The 1995 scheme

• 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.

The 2008 scheme

• 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.

The Hutton Report 2011

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.

The 2015 Scheme

• 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

McCloud Judgement

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.