Which NHS Pension Scheme(s) Applys to Me
27.03.2018 , BY Kevin Quinn
27.03.2018 , BY Kevin Quinn
As readers of this article will no doubt be aware, there have been a number of changes to the NHS Pension (NHSP) scheme during the past ten years, the results of which are that there are currently now three NHSP schemes in existence.
These are the NHSP 1995 Section, the NHSP 2008 Section and the NHSP 2015 Scheme and depending on individual circumstances, the vast majority of members (rare cases notwithstanding) will have benefits in either one or two of the NHSP schemes when they retire.
In this article, I will briefly set out the key differences between the various NHSP schemes and also the factors that will determine which scheme(s) apply to a particular individual.
There are a number of differences between the various NHSP schemes, however, for many individuals, two of the important variances will relate to the scheme accrual rate (the amount by which pension benefits accrue each year) and the scheme Normal Pension Age (NPA).
The 2008 Section and the 2015 Scheme have higher accrual rates than the 1995 Section. The effective comparative accrual rates for a GP member are 1.75% per annum (p.a.) in the 1995 Section, 1.87% p.a. in the 2008 Section and 1.85% p.a. in the 2015 Scheme.
However, the NPA for the 1995 Section is age 60 (or age 55 for members with “Special Class” status), whereas the NPA for the 2008 Section is age 65 and for the 2015 Scheme NPA, is linked to the individual’s State Pension Age (SPA) and SPA is due to increase to age 67 by 2028.
NHSP benefits taken before NPA are subject to Early Retirement Factors (ERFs) and as such, even though the accrual rates in the 2008 Section and 2015 Scheme are higher than the 1995 Section, depending on when an individual plans to retire, it is possible that the 1995 Section will still produce greater overall benefits.
The particular NHSP scheme(s) that apply to an individual will depend on two main factors. Firstly, the date they first joined the NHSP and secondly, whether they have already been (or will be) automatically moved into the 2015 Scheme.
Whether members of the 1995 Section and 2008 Section will be automatically moved into the 2015 Scheme depends on the level of NHSP Protection that they have (either Full Protection, Tapered Protection or No Protection) which, in turn, depends on when they were born as follows:
Individuals who fall into scenarios 2 can work out the exact date that they will be automatically switched from either the 1995 Section or 2008 Section into the 2015 Scheme by using the “Tapered Protection” calculator which can be found on the NHSP website.
In scenarios 2 and 3 above, the accrued 1995 Section/2008 Section benefits to date of moving into the 2015 Scheme will then become “Preserved Rights”.
This means that the 1995 Section/2008 Section benefits can continue to be taken free of ERFs at the original NPAs for these schemes (i.e. ages 60 and 65 respectively).
For “Officer” members, provided that they have not had a break in scheme membership of five or more years that ended on or after 1st April 2015, their preserved 1995 Section/2008 Section benefits will continue to be calculated based on their final salary at or near retirement.
For “GP” members, the preserved 1995 Section/2008 Section benefits from the date of moving into the 2015 Scheme will continue to be increased in line with Consumer Prices Index (CPI) plus 1.50% per annum whilst they are still contributing (and building up further benefits) in the 2015 Scheme.
When individuals with Preserved Rights eventually come to take their NHSP benefits, they will have two NHSP “pots”; one pot in either the 1995 Section or 2008 Section and one pot in the 2015 Scheme.
At retirement, these individuals will have the option of taking both their 1995 Section/2008 Section and 2015 Scheme benefits at the same time. However, as mentioned above, each NHSP pot will have different accrual rates and NPAs applying and any benefits taken before each scheme’s NPA will be subject to ERFs.
Individuals with Preserved Rights in the 1995 Section should also be aware that they will need to retire from the NHS in order to take their 1995 Section benefits.