A new pension scheme was introduced on 1 April 2015. Approximately 75% of existing NHS employees and all new employees will have joined the new 2015 NHS pension scheme (2015 NHSPS).
Over the 12 months from April 2014 to March 2015 we produced a series of regular monthly updates for members on the key aspects of the 2015 NHSPS, starting with this overview which explains the basics of the scheme.
How does it affect you?
Some members will not have to join the 2015 NHSPS because they have full protection.
This means that they were within 10 years of their normal pension age on 1 April 2012.
Others, who were between 10 and 13.5 years of their normal pension age on 1 April 2012 will get tapering protection.
This means that they will still have to join the 2015 NHSPS but their joining date will be delayed, depending on how close to their normal pension age they were on 1 April 2012.
How is 2015 NHSPS different?
The 2015 NHSPS differs in many ways to the existing sections of the NHSPS.
Currently the 1995 and 2008 sections of the NHSPS provide final salary benefits for doctors working in secondary care and career average revalued earnings (CARE) benefits for GPs. The 2015 NHSPS will provide CARE benefits for all doctors.
As of 1 April 2015, approx. 75% of existing NHS employees and all new employees will join the new 2015 NHSPS
CARE pension schemes differ from final salary in that they take account of pensionable earnings in every year of scheme membership rather than just prior to retirement.
The accrual rate in the 2015 NHSPS will be 1/54 (equivalent to 1.85%), this means that every year a member will accrue 1/54 of their pensionable earnings. The total of all the annual pension accrual amounts is added together at retirement to calculate the final pension.
Of course if you are going to base pension accrual on lifetime earnings then it is necessary to have in place a mechanism for revaluing previous years' earnings so that they do not lose value. In the 2015 NHSPS the revaluation rate will be the Consumer Prices Index (CPI) plus 1.5%.
Need an example?
- Let's say that you earn £75,000 in pensionable income this year and the CPI rate is 3%.
- Your pension would be 1/54 x £75,000 = £1,389 and it would be increased by the revaluation rate (CPI 3% + 1.5%) to £1,452.
- Every year the total of the previous years' pension accrual would be increased by the relevant rate for that year.
Read the next update for May which focuses on when you can draw your pension
If you have any questions or points to make then please contact the Pensions team