Members will by now be aware that on 1 April 2015, the new 2015 NHS pension scheme (2015 NHSPS) will be introduced.
Around 75% of existing NHS employees and all new employees will join the new scheme from that date.
Over the last year we have been providing monthly updates to members on the key aspects of the 2015 NHSPS, this is the last in that series so let’s recap on the basics of the scheme.
Will you have to join the new scheme?
- 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.
- Members who were more than 13.5 years away from their normal pension age on 1 April 2012 will join the 2015 scheme on 1 April 2015.
Career average revalued earnings (CARE)
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.
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.
Accrual and revaluation rates
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.
As the pension is building up annually based on actual pensionable earnings, the pension amounts earned during earlier years will be subject to revaluation. The revaluation will take place at the end of each scheme year at a rate determined by the Treasury, likely to be the Consumer Prices Index (CPI) plus 1.5% . This revaluation will prevent benefits accrued during earlier years being devalued by inflation.
Increase in normal pension age (NPA)
Another key aspect of the 2015 NHSPS is the increase in normal pension age. The following examples illustrate this:
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 retires after 1 April 2015 and returns to work in the NHS he will not be able to rejoin the NHS pension scheme.
Kellie is a 43-year-old consultant who opted to move to the 2008 section of the scheme under Choice 2.
As she was more than 13.5 years from her normal pension age on 1 April 2012 Kellie will not receive any form of protection and so decided to transfer her accrued benefits from the 1995 section to the 2008 under Choice 2. She will join the 2015 Scheme on 1 April 2015. Kellie has 20 years of final salary pension in the 2008 section and this will be linked to her reckonable salary at retirement, which means that she will benefit from any future pay increases.
From 1 April 2015 Kellie will start to build up benefits in the 2015 Scheme under CARE accrual. She will be able to draw her 2008 section benefits 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 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 is a 37-year-old Staff Grade doctor and a member of the 1995 section.
Moussa was more than 13.5 years from his normal pension age 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 final 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 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 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 is a 21-year-old medical student who will start work in April 2015 and immediately join the 2015 Scheme.
Beatrice 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 is 68. However as Beatrice has a long time until retirement, she realises that because her NHS normal pension age is linked to her state pension age that it is likely to increase during her career if the Government increases the state pension age due to improving mortality rates.
Please contact BMA employment support on 0300 123 1233 to discuss any matters relating to the 2015 Scheme.