Pensions

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Redundancy for transitional members FAQs

Transitional members

This section is relevant to you if you have joined the 2015 NHS Pension Scheme and you also have membership in the 1995 and 2008 sections of the Scheme. It covers the following guidance:

GP flexibilities for transitional members
Ill health retirement for transitional members
Mental Health Officers joining the 2015 scheme
Redundancy for transitional members

 

Answers to common queries concerning redundancy for members of the 2015 NHS Pension Scheme who also have membership in the 1995 or 2008 sections of the Scheme.

 

What happens if I am made redundant after joining the 2015 scheme?

If you have more than two years' of service a compensation payment of one month's pay for each year of NHS employment (up to a maximum of 24 months' pay) is payable.

Details of the exact amount of compensation payable will be provided by your employer.

You can get help in confirming the accuracy of the redundancy payment by calling the BMA on tel: 0300 123 1233.

Please note that the Public Sector Exit Cap is expected to be implemented in April 2016 and could affect the level of compensation provided to you as well as the extent to which the options detailed below will be applicable. This cap will limit the overall amount payable by the employer to £95,000 in relation to all costs, including the redundancy payment and any costs involved in paying a pension unreduced.

If you are over the minimum pension age of 55 and have at least two years of membershipof the NHS pension scheme you can also choose whether to access your pension benefits and you will be provided with various options as to how this can be done.

 

What is my minimum pension age?

Since joining the 2015 scheme your minimum pension age is 55. It is proposed that the minimum pension age will increase to 57 from 2028 and will remain at 10 years below the State Pension Age thereafter.

If you are 55 or over and have at least two years' membership of the NHS pension scheme (combined between your previous section and the 2015 scheme) you will be able to draw your pension benefits from your date of redundancy, should you wish to do so. If you do not wish to incur the actuarial reduction that retirement before your State Pension Age involves, you will need to forgo your redundancy payment and could be required to pay an additional lump sum in order to meet the costs of removing the actuarial reduction completely.

 

What happens if I am made redundant under age 55?

If you are under the 2015 scheme's minimum pension age of 55 you are not able to draw your 2015 pension immediately on redundancy.

The benefits from your 1995 section membership can be paid immediately if you are over age 50.

Your options on redundancy are:

  • Receive a redundancy payment and a deferred pension (1995 and 2015 sections), or
  • Receive a redundancy payment and an actuarially reduced pension (1995 section only), or
  • Use the redundancy payment towards meeting the cost of unreduced benefits (1995 section only).

The options available to you in respect of your 1995 section benefits are detailed in the question below. Once you have drawn your 1995 section benefits you will not be able to continue/restart contributions to the 2015 scheme unless you have more than one pensionable NHS post and only take redundancy from one.

Whilst MHO status no longer applies in the 2015 scheme, the benefits from your 1995 section membership can be paid immediately. The options available to you in respect of your 1995 section benefits are detailed in the question below. If you choose to defer payment of the 1995 section benefits they can be paid without reduction from age 55 (providing you have had at least 20 calendar years service in a MHO qualifying role), assuming you have not returned to NHS service. If you have returned to NHS service you will need to take the required break to claim your 1995 section benefits. Once you have drawn your 1995 section benefits you will not be able to continue/restart contributions to the 2015 scheme unless you have more than one pensionable NHS post and only take redundancy from one.

The benefits from your 2008 section membership will be deferred in the scheme and will be payable without reduction from normal pension age of 65, or from age 55 with reduction. Once you have drawn your 2008 section benefits rejoining the 2015 scheme is possible so long as 45 calendar years' membership/age 75 have not been reached.

Your 2015 scheme benefits can remain deferred in the scheme and will be payable without reduction from your State Pension Age. If, after leaving the scheme, the State Pension Age changes it is this age at which benefits can be accessed unreduced and not the State Pension Age which was relevant to you at the time when you left the scheme.

 

What happens if I am made redundant over age 55 and have yet to reach the normal pension age of the 1995/2008 section (60 in the 1995 section and 65 in the 2008 section)?

Your options on redundancy are:

  • Receive a redundancy payment and a deferred pension, or
  • Receive a redundancy payment and an actuarially reduced pension, or
  • Use the redundancy payment towards meeting the cost of unreduced benefits.

If you are over the scheme's minimum pension age of 55 you can opt to use the redundancy payment to fund for the early payment of all of your benefits without reduction.

If your redundancy payment is insufficient to meet the cost involved in paying you an unreduced pension then your options are as follow:

  • If your contract of employment includes the 'Additional Payment' option then in order for all of your pension benefits to be paid to you without reduction you will be required to pay the additional cost by lump sum before your employment terminates. Your choices are therefore to accept a partially reduced pension or to meet the cost yourself
  • If your contract of employment does not include the 'Additional Payment' option then if your redundancy payment is insufficient to meet the cost involved in paying you an unreduced pension your employer will have to meet the additional cost involved. This assumes that the Public Sector Exit Cap has not been implemented. If it has then the employer will not meet the cost beyond funding an overall limit of £95,000 (including the compensation payment made to you).

Whether your contract includes the 'Additional Payment' option or not if your redundancy payment exceeds the costs required to pay your benefits unreduced the excess will be paid to you.

The redundancy payment will paid to you if you do not wish to access your pension or if you are happy to access your pension with the appropriate actuarial reduction.

If you choose to leave your benefits preserved these can then be built on should you secure pensionable NHS employment in the future. Please note the significance of a five year break in service as referenced in this NHSBA document.

If you have deferred your 1995 section benefits you can rejoin the 2015 scheme if you take up further pensionable NHS employment in the future. Further membership of the 2015 scheme is possible for 2008 scheme members even after benefits have been drawn so long as they are under age 75 and have not achieved 45 calendar years of service in the scheme.

 

What happens if I am made redundant and am over the normal pension age of my previous section (60 in the 1995 section and 65 in the 2008 section) but under the State Pension Age?

If you are over the normal pension age relating to your previous section but have not yet reached the State Pension Age the redundancy options detailed in this document will relate only to your 2015 scheme benefits as your previous benefits will be payable without reduction and without the need to forgo your redundancy payment.

Once you have accessed your 1995 section benefits you will not be able to resume membership of the 2015 scheme. The exceptions to this are:

  • Where you have had a break in service of 5 years or more and have lost the final salary link. In this situation membership of the 2015 scheme can continue (so long as you have not achieved 45 calendar years of service or reached age 75), or
  • Where you have more than one pensionable NHS post and are redundant in only one job.

Once you have accessed your 2008 section benefits you will be able to resume membership of the 2015 scheme, so long as you have not achieved 45 calendar years of service or reached age 75.

 

My contract includes the 'Additional Payment' option. How will this apply to both my previous 1995/2008 and 2015 scheme benefits?

If your contract includes this option your employer is not required to meet any costs relating to the payment of your unreduced pension if you are made redundant over your minimum pension age but under your previous sections normal pension age (60 for the 1995 section and 65 for the 2008 section). You can, however, use your redundancy payment towards meeting this cost. If the redundancy payment is sufficient to meet the cost then no additional monies will be needed and you can receive your pension unreduced (previous 1995/2008 and 2015 scheme benefits). If your redundancy payment exceeds the cost then the excess will be paid to you.

However, where your redundancy payment is insufficient to meet the full cost of paying your pension unreduced you can choose whether you wish to pay more to reduce or remove the reduction totally. If you do not wish to use this facility then your benefits will be paid partially reduced.

Where the actuarial reduction is not fully removed the partial payment made to remove any reduction will apply to your previous 1995/2008 benefits first.

 

Is there a deadline for me to pay any lump sum in respect of the 'Additional Payment' option?

Any additional monies needed to reduce or remove the actuarial reduction to your pension must be paid no later than one month before your pension is to become payable.

 

How much will I have to pay if I opt for the 'Additional Payment' option?

In addition to forgoing your redundancy payment the cost for the payment of all of your NHS pension on an unreduced basis is calculated with reference to Government Actuary Department tables.

Tables that apply to members in England and Wales

 

What if I have more than one job and am only being made redundant from one?

The options available to you are:

  • Accept the redundancy payment from the post making you redundant and simply continue in pensionable service in your ongoing NHS post and in any subsequent post undertaken;
  • Claim immediate payment of the pension relating to the redundant post only. This option is only available if you are over age 55. This pension will be reduced to reflect early payment unless the redundancy payment is used to meet the cost of paying the benefits without a reduction. If your contract includes the 'Additional Payment' option you may need to pay an additional lump sum into the scheme if you want your pension benefits to be paid without reduction. This may also be the case if the Public Sector Exit Cap has been implemented. Resumed pensionable service in the NHS will not be possible once 1995 section benefits have been accessed (unless the final salary link has been lost as a result of a break in service of 5 years or more) or if 45 calendar years of service has been achieved or age 75
  • If you are over the minimum pension age, you can use your redundancy payment to enable an unreduced pension to be payable in respect of all of the NHS posts held up to the date of redundancy. If you are redundant between age 50 and 55 and wish to access your benefits this is the only option available to you. If your contract includes the 'Additional Payment' option you may need to pay an additional lump sum into the scheme if you want your pension benefits to be paid without reduction. This may also be the case if the Public Sector Exit Cap has been implemented. Resumed pensionable service in the NHS will not be possible once 1995 section benefits have been accessed (unless the final salary link has been lost as a result of a break in service of 5 years or more) or if 45 calendar years of service has been achieved or age 75.

 

I am a GP. Can I access redundancy benefits?

As a GP partner you cannot be made redundant. Whilst a Salaried GP can be made redundant and receive a redundancy payment neither a GP partner nor a Salaried GP can receive an unreduced pension as a result of redundancy.

If you also work as a secondary care doctor then you will be able to access redundancy benefits in relation to this work.

If you are made redundant in relation to a concurrent secondary care role you can choose to cease all NHS employment (including your GP post). The options, detailed above, relating to accessing your pension will apply to your non-practitioner post(s) only. Any GP pension accessed will be subject to the appropriate actuarial reduction if redundancy takes place when you are over the minimum pension age but under your State Pension Age.

It is only possible to access a pension relating to your GP service without actuarial reduction (assuming you have not yet reached your State Pension Age) if you ceased your GP post more than 12 months before the redundancy. In this case the pension relating to your GP post can become payable without reduction if you choose to give up your redundancy payment to fund for the unreduced payment of your pension benefits. You may be required to pay more than your redundancy payment in order to achieve this if your contract of employment for your secondary care role includes the 'Additional Payment' option or once the Public Sector Exit Cap has been implemented.

 

Do I need to pay tax on my redundancy payment?

The first £30,000 of your redundancy payment of is tax free. Any excess will be subject to tax at your marginal rate.

If, in addition to a redundancy payment, a further amount is paid by way of an ex-gratia payment, this is tax-free but only within the £30,000 limit.

Pay in lieu of notice is taxable in full unless it is paid as a result of breaching a requirement to give notice in which case it is tax-free within the £30,000 limit (other payments may fall within the £30,000 limit if they are shown to be in respect of compensation for breach of contract).

The above information should be taken as general guidance only and is not intended to cover every situation. The taxation of termination payments is a complex area and you should take specialist advice from HM Revenue and Customs or from your accountant.

 

What happens if I am being made redundant in the interests of the efficiency of service?

Early retirement in the interests of the efficiency of service might be available if you have given valued service in the past but are no longer able to do so. This might be because of new or expanding duties, or a decline in capability arising from age or domestic circumstances.

No redundancy payment is payable but an unreduced pension is paid immediately funded for by your employer. Once the Public Sector Exit Cap is implemented the employer will only fund this up to the limit of £95,000. If this is insufficient to meet the full cost of paying the pension unreduced the pension will be paid partially reduced unless you are able to meet the additional costs required.

 

Can I return to work in the NHS following redundancy?

You can return to NHS employment following redundancy.

However the Government is currently consulting on proposals to restrict the ability to return to NHS employment once in receipt of NHS pension benefits. The outcome of this consultation is not yet known but is expected to be implemented in April 2016.

The current position is that in cases of early retirement on the grounds of redundancy or in the interests of the efficiency of service, a break of only one day is sufficient to claim your pension if you are accessing benefits from both the 1995 or 2008 sections and 2015 scheme.

There are restrictions which affect eligibility to retain your full redundancy payment if you return to NHS employment. Call the BMA on tel: 0300 123 1233 if you require further details on this.

If you are in receipt of an NHS pension following redundancy, your pension cannot be suspended if you return to work and abatement will not apply to your pension.

 

Can I rejoin the NHS pension scheme after opting to take my pension early following redundancy?

If you have accessed benefits from the 1995 section, you cannot rejoin the 2015 scheme following retirement. One exception to this is if you were made redundant from one post while continuing in a concurrent post. In this case you may opt to continue in the scheme in respect of the concurrent post and any subsequent posts thereafter. Another exception to this is if you have had a break of 5 years or more and have lost the final salary link.

If you have accessed benefits from the 2008 section it is possible to rejoin the 2015 scheme following retirement, provided that you have not reached the scheme membership limits of 45 years' of pensionable service or age 75.

 

Will my pension be affected if I return to work in the NHS?

The Government is currently consulting on proposals to restrict the ability to return to NHS employment once in receipt of NHS pension benefits. The outcome of this consultation is not yet known but is expected to be implemented in April 2016.

The current position is if you return to work after claiming your pension following redundancy, your NHS pension will be unaffected and abatement will not apply. An exception to this is for former MHOs who have not had to use their redundancy payment in order to receive an unreduced pension. Abatement will continue to apply to MHO pensions as per the abatement rules relating to the 1995 section.

If you return to work after claiming your pension following retirement on the grounds of the efficiency of the service then your pension may be affected. Please refer to our FAQ on Abatement for further information.

 

Does my CEA/Distinction awards continue to be payable if I return to work?

These awards are not payable after retirement.

However, you may want to speak to your employer when negotiating re-employment to see if your previous level of remuneration can be taken into account.

 

What happens to my added years, additional pension, Additional Voluntary Contributions (AVCs) or Free-Standing Additional Voluntary Contributions (FSAVCs)?

If you access your pension on redundancy:

  • A credit will be given for any added years purchased. The size of this credit will depend upon the proportion of the added years contract that has been completed. An actuarial reduction will apply as the benefits will be paid earlier than the intended contract end date. This reduction will apply regardless of whether you have used your redundancy payment to fund the early payment of unreduced benefits. This reduction cannot be bought out by the 'Additional payment' option.
  • A credit will be given for any additional pension purchase made. The size of this credit will depend upon the proportion of the purchase that has been completed. An actuarial reduction will apply as the benefits will be paid earlier than the intended retirement date. This reduction will apply regardless of whether you have used your redundancy payment to fund the early payment of unreduced benefits. This reduction cannot be bought out by the 'Additional payment' option. If you elected to pay by regular contributions, the contributions will be refunded if retirement takes place within twelve months of commencing the purchase. If you elected to purchase by a single lump sum payment and retirement takes place within twelve months of making the payment then the purchase is nonetheless included in the benefits payable
  • The accumulated value of any additional voluntary contributions (AVCs) or free standing additional voluntary contributions (FSAVCs) can be taken at the same time as your NHS pension on early retirement. This need not be the case, however, and the purchase of the annuity can be deferred.

Please note that the deferment of an AVC or FSAVC plan does not necessarily result in greater benefits. You should seek independent financial advice if you are considering doing this.

 

I have started an Early Retirement Reduction Buy Out (ERRBO) option. How does this impact on my redundancy?

Account will be taken of this purchase in determining the costs involved to pay your pension without reduction. An ERRBO purchase will reduce the costs involved and could mean that less of your redundancy payment is required to offset the employer cost, meaning that some may be repaid to you as excess.

If retirement is in the interests of the efficiency of the service the ERRBO will reduce the cost of early payment of unreduced benefits which may benefit you when the Public Sector Exit Cap is introduced.

 

What cost does my employer have to meet?

Employers are required to meet the following costs of redundancy, and redundancy in the interests of the efficiency of the service:

  • The redundancy payment (not applicable in the case of redundancy in the interest of the efficiency of the service). Once the Public Sector Exit Cap is introduced the employer will only meet this cost up to a total of £95,000
  • If your redundancy payment is insufficient to meet the cost of funding the payment of unreduced benefits following redundancy, and your contract of employment does not include the 'additional payment' option, then your employer will meet the shortfall. Once the Public Sector Exit Cap is introduced the employer will only meet this cost up to a total of £95,000 (including any redundancy compensation payment)
  • If you are being made redundant in the interests of the efficiency of the service your employer will meet the cost of funding the payment of unreduced benefits. Once the Public Sector Exit Cap is introduced the employer will only meet this cost up to a total of £95,000.

 

I am 'drawing down' part of my pension from the 2008/2015 section. How does redundancy affect me?

The redundancy rules will continue to apply, as above, to that portion of your pension benefits which is not in draw down.