Pensions

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When can I draw my NHS pension benefits?

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

 

In this second update on the 2015 NHS Pension Scheme (NHSPS) we are going to look at the position for doctors who have a mixture of benefits in different sections of the NHS Pension Scheme and when they can draw them.

The existing NHS Pension Scheme has two sections: the 1995 and 2008 sections. A new NHS Pension Scheme will be introduced on 1 April 2015 and will be called the NHS Pension Scheme 2015.

The 1995 section has a normal pension age (NPA) of 60. This means that at age 60 doctors can draw their pension and lump sum benefits at an unreduced rate.

In the 2008 section the NPA is 65 and in the 2015 Scheme NPA will be linked to an individual's State Pension Age (SPA), or age 65 if that is later. Benefits drawn prior to NPA are usually subject to an actuarial reduction because they are being paid earlier than anticipated and for longer.

The government has announced two forms of protection as part of the transitional changes to introduce the NHS Pension Scheme 2015. Full protection applies to those doctors within 10 years of their normal pension age on 1 April 2012 and tapering protection to those within 13.5 years.

 

Case studies

In order to illustrate these issues we are going to look at the position of four different doctors.

Hugo

Hugo is a 55-year-old GP and a member of the 1995 section.

He was within 10 years of his normal pension age on 1 April 2012 and therefore he has full protection and will not have to join the 2015 Scheme on 1 April 2015. He can continue accruing benefits in the 1995 section and draw his pension and lump sum at age 60 if he wishes. If Hugo draws his pension prior to age 60 it will be actuarially reduced but he can remain in the scheme beyond age 60 as long as he doesn't exceed 45 years calendar service or age 75. If Hugo retires after 1 April 2015 and returns to work in the NHS he will not be able to rejoin the NHS pension scheme.

Kellie

Kellie is a 43-year-old consultant who opted to move to the 2008 section of the scheme under the 'Choice Exercise'.

She was more than 13.5 years from her normal pension age (NPA) on 1 April 2012 so will not receive any form of protection. She will therefore join the 2015 Scheme on 1 April 2015. Having transferred from the 1995 section to the 2008 under the 'Choice Exercise', Kellie has a NPA of 65. Kellie accrued 20 years of final salary pension in the 2008 section. This will be linked to her reckonable salary at retirement, which means that she will benefit from any future pay increases. These benefits are called protected rights.

From 1 April 2015 Kellie will start to build up benefits in the 2015 Scheme under Career Average Revalued Earnings (CARE) accrual. She will be able to draw her protected rights from the 2008 section at age 65 and either draw her 2015 Scheme benefits at the same time (they would be subject to an actuarial reduction) or leave them in the scheme until her State Pension Age (SPA) of 67. If Kellie draws her benefits from the 2008 Section and returns to work then providing she has taken the appropriate break in service she would be able to build up further benefits in the 2015 Scheme.

Moussa

Moussa is a 37-year-old Staff Grade doctor and a member of the 1995 section.

He was more than 13.5 years from his normal pension age (NPA) on 1 April 2012 so will not receive any form of protection. He will therefore join the 2015 Scheme on 1 April 2015. Moussa accrued 10 years of final salary pension in the 1995 section. This will be linked to his actual salary at retirement, which means that he will benefit from any future pay increases.

From 1 April 2015 Moussa will start to build up benefits in the 2015 Scheme under Career Average Revalued Earnings (CARE) accrual. He will be able to draw his protected rights from the 1995 section at age 60 and either draw his 2015 Scheme benefits at the same time or leave them in the scheme until his State Pension Age (SPA) of 68. If Moussa draws his benefits from the 1995 Section and returns to work he would not be able to build up further benefits in the 2015 Scheme. If he draws his 2015 section benefits at age 60 (with his 1995 Section benefits) then the 2015 Scheme benefits would be actuarially reduced.

Beatrice

Beatrice is a 22-year-old medical student who will start work in April next year and immediately join the 2015 Scheme.

She will join the NHS Pension Scheme for the first time on 1 April 2015. She will accrue benefits under the CARE method and her State Pension Age (SPA) is 68. However as Beatrice has a long time until retirement, she realises that because her NHS normal pension age (NPA) is linked to her SPA that it is likely to increase during her career if the Government increase the SPA due to improving mortality rates.

What's next?

Read the next update for June which focuses on the process of auto-enrolment and National Insurance rebates

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