Pensions

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Are you ready for Choice 2?

2015 NHS pension scheme

Read the monthly updates written by the BMA Head of Pensions over the last year to help you familiarise yourself with the new 2015 NHS Pension Scheme which launched on 1 April 2015.

Start with our general overview of the scheme:

1  Stay one step ahead - get the basics of the scheme
2  When can I draw my pension benefits?
3  Auto-enrolment and National Insurance rebates
4  Opting out of the NHS Pension Scheme
5  Choice 2 exercise
6  Contributions
7  Are you ready for Choice 2?
8  What happens to my Mental Health Officer status?
9  BMA response to the 2015 NHS Pension Scheme draft regulations
10  Have you received your 'Choice 2' letter?
11  Act now to make your choice 2 decision
12  A recap on the basics of the 2015 NHSPS

 

Earlier this year we published some information on Choice 2. The time is now approaching for those 1995 section members without full protection from the 2015 scheme changes to make their decision.

Your Choice 2 letter will be sent out by the NHS Pensions Agency in England and Wales* during October and November and you will then have at least three months to make your choice.

Read our update on Choice 2

 

To move or not to move…

The letter that you will receive will confirm that you will become a member of the 2015 Scheme on 1 April 2015 (or later for those with tapered protection). It will enable you to decide whether or not it is in your interests to move your accrued 1995 section benefits into the 2008 section under Choice 2. This will depend upon - amongst other things - the age at which you intend to retire and whether you remain in NHS Employment until that age.

To move or not to move..?
This could depend upon the age at which you intend to retire and whether you remain in NHS Employment until that age.

One of the main drivers for Choice 2 is the fact that the Normal Pension Age (NPA) in the 2015 Scheme is linked to the state pension age (SPA).

If you choose to transfer under Choice 2 then your accrued benefits will be based on a NPA of 65 in the 2008 section which is closer to the SPA-linked NPA in the 2015 section (age 66+) than the 1995 section, which has a NPA of 60. This distinction is particularly relevant if you draw your accrued benefits early, due to the actuarial reduction factors that would apply.

Those members who chose to remain in the 1995 section under the original Choice exercise (which began after the last scheme changes in 2008) had not anticipated any further increase to NPA so chose to forgo the increased accrual rates of the 2008 section in order to retain a lower NPA.

 

Think carefully

Careful consideration should be given to your decision. If you are buying added years in the 1995 section then you will not be able to continue the contract if you move to the 2008 section.

Careful consideration should be given to your decision.

If you have Mental Health Officer (MHO) status then you will lose it if you switch to the 2008 section. MHO status will end with the introduction of the new scheme in 2015, but you will retain the retain ability to access benefits from NPA 55 if certain conditions are met and you remain in the 1995 section.

Looking further down the line, you would not be able to continue accruing pension benefits in the 2015 Scheme if you claimed your 1995 Section benefits, but you could do so if you had switched to the 2008 section. The Choice 2 letter will seek to clarify those situations in which the decision to switch is unlikely to benefit you.

 

Do you have Tapered Protection?

Members with Tapered Protection (Choice 2 does not apply to members with full protection) should note that if they choose to move from the 1995 Section to the 2008 Section then they would lose the potential period of tapering service in the 1995 Section and would join the 2015 Scheme on 1 April 2015.

Careful consideration should be given to the relative value of potential membership in either the 1995 Section or 2015 Scheme.

Find out more information on Tapered Protection

 

Helpful tools from the NHS Pension Agency

The NHS Pensions Agency will be providing a Choice 2 online calculator as well as a Choice 2 Decision Tree on their website to further assist members with their decision.

NHS Pension Agency - Choice 2 tools

 

*Choice 2 will take place in Scotland from April 2015 and at a date yet to be confirmed in Northern Ireland.

 

What's next?

Read the next update for November which focuses on what happens to your mental health officer status.

If you have any questions or points to make then please contact the Pensions team