Pensions

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Moving between NHS and university employment FAQs

Get answers to the following questions and more on the differences between the schemes:

Are the University Superannuation Scheme (USS) and NHS pension schemes the same?
I am taking up an academic post. What are my options?
What is a 'direction' arrangement?
How do I apply to remain in the NHS pension scheme if my new employer has direction status?
How do I apply to remain in the NHS pension scheme if my new employer does not have 'direction' status?
Can I have a refund of my earlier contributions?
What happens to my benefits if I leave them deferred?
Can I transfer my benefits between the schemes?
How do I arrange a transfer of pension rights?
Are there any time limits on requesting a transfer of benefits between schemes?
What factors do I need to consider in reaching a decision about whether to transfer my benefits?
I am moving from a University post to an NHS post.  Can I have a 'direction' arrangement to enable me to carry on paying into the USS?
I have Mental Health Officer status in the NHS pension scheme.  What do I need to consider on taking up an academic post?

 

BMA position on UCU strike

Following proposals from Universities UK to make further changes to the Universities Superannuation Scheme (USS), the University and College Union (UCU) has called a series of strikes at 61 universities. The proposed changes would significantly reduce the pension benefits that it provides.

Read our FAQs for BMA members

 

Are the University Superannuation Scheme (USS) and NHS pension schemes the same?

Recent changes have resulted in the schemes no longer being as comparable as they once were. While the 1995 section of the NHS pension scheme (for secondary care doctors) and the final salary section of the USS accrue benefits on an 1/80th final salary basis, the creation of other sections to those schemes, as well as other developments, mean that the comparison is not straight forward. In 2008 a new section of the NHS pension scheme was created, accruing benefits for secondary care doctors on a 1/60th final salary basis. Then in 2015 NHS Career Average Revalued Earnings (CARE) scheme was introduced which no longer provides final salary benefits for any member. Instead benefits for those in the 2015 CARE scheme are based on 1/54th of pensionable earnings accruing towards the pension.  

In October 2011 the USS introduced a new section for new joiners after that date and for returners (following a break of two and a half years or more).  Benefits in this section of the USS accrue on a Career Averaged Revalued Earnings basis, accruing at 1/80th of each year’s earnings. From 1 April 2016 a new USS scheme applicable to all USS members was introduced called the USS Retirement Income Builder. This scheme is a Career Revalued Benefits (CRB) scheme. 

USS Retirement Income Builder benefits are based on your full pensionable salary up to 30 September 2016. From 1 October 2016 a salary threshold of £55,000 was introduced. This threshold is increased annually. In 2017/18 the salary threshold was £55,550 increasing to £57,216.50 in 2018/19. Contributions in respect of salary above the threshold are invested in the USS Investment Builder (a defined contribution scheme similar to a personal pension).

So your retirement savings within USS from 1 October 2016 are made up of two parts:
The USS Retirement Income Builder (CRB benefits) in respect of your salary up to the threshold; plus
The USS Investment Builder (defined contribution) in respect of your salary over the threshold.

Further to a proposal to reduce the Retirement Income Builder threshold to nil and to have all benefits accruing solely in the defined contribution scheme UCU members voted to begin industrial action.  This ultimately led to an agreement to review the valuation of the scheme and to suspend any proposed changes to be made until April 2019 whilst a joint review takes place.  

At present the NHS 2015 CARE scheme provides a defined benefit accrual for all NHS pensionable earnings whereas the 2016 USS CRB scheme only provides this up to threshold income of £57,216.50. 

 

I am taking up an academic post. What are my options?

If you stop working for the NHS and take up an academic post with a university you may be able to continue to pay into the NHS pension scheme via what is known as a ‘direction’ arrangement.  This facility enables you to continue to contribute towards your existing NHS pension despite no longer being employed by the NHS. More information on directions is available in the 'Direction' FAQ.

Regardless of whether this option is available to you or not, you can consider:

  • deferring your NHS pension (assuming you have at least 2 years’ membership in the scheme) and beginning new pension accrual in the USS
  • transferring your NHS pension into the USS and beginning to accrue future service in the USS.

You will need to take into consideration many different factors before reaching a decision on which scheme to remain in or join, including:

  • your intended retirement age
  • your prospective salary progression
  • your career plans (such as whether you are likely to return to the NHS or not)
  • Mental Health Officer (MHO) status
  • the Earnings Cap
  • the USS no longer being part of the 'club transfer'

 

What is a 'direction' arrangement?

This is a facility which enables you, to remain in the NHS pension scheme if you are appointed to a medical school in England and Wales, provided that you have contributed to the NHS pension scheme at some time during the 12 months prior to the university appointment starting. The option of remaining in the NHS pension scheme should be detailed in your contract and you should query this if it is not. The 'direction' facility is also available in the HSC pension scheme (Northern Ireland).

'Direction' arrangements are also available if you are working in a medical school in Scotland. Since 2017 the arrangement applies in Scotland on the same basis as in England and Northern Ireland. Prior to this the facility was only available in Scotland to doctors who were purchasing added years or the unreduced lump sum in the 1995 section of the NHS pension scheme and whose contracts, which must begin within 12 months of leaving NHS employment, was for no more than eight years.

 

How do I apply to remain in the NHS pension scheme if my new employer has direction status?

You need to apply in writing to remain in the NHS pension scheme within three months of starting your new job. Membership will not be granted automatically. Because there are different NHS pension schemes for Scotland, Northern Ireland and England and Wales, you should apply to the administrator of the pension scheme in the country in which the university appointment is held.  For example if you are moving from an NHS post in England to a university appointment in Scotland you should apply to the Scottish Public Pensions Agency in order to remain in the NHS superannuation scheme (Scotland). You will then begin to accrue benefits in the NHS superannuation scheme (Scotland) and you may wish to transfer your benefits from the NHS pension scheme in England and Wales to the Scottish scheme.  

Direction arrangements do not include access to the NHS Injury Benefits/NHS Injury Allowance scheme or usually to NHS pension benefits on redundancy.  However, depending on which medical school you work for and when their direction arrangement began you may be covered for benefits in the event of redundancy.  The criteria to meet in order to be covered are:

  • the institution needs to be covered by a 'direction' arrangement starting before 28 August 1998
  • you will need to be over 50
  • you will need to have at least five years' calendar service.

As this is a complex area and you should contact the BMA Pensions Department if you are being made redundant from a medical school whilst contributing to the NHS pension scheme via a direction arrangement.  

Direction arrangements are not available to general practitioners and only applies to those who work under a formal contract of employment.

 

How do I apply to remain in the NHS pension scheme if my new employer does not have 'direction' status?

It is possible for you to apply for 'direction' status as an individual, or for your new employer to apply to become an NHS employer for pension purposes.

Further information on this is available on the relevant pensions agencies web sites.

 

Can I have a refund of my earlier contributions?

If you have less than two years' membership of either the NHS pension scheme or the USS you can obtain a refund of your contributions, less tax.  Any refund of contributions would be reduced by:

  • a tax payment of 20% for the first £20,000 refunded and 50% on any excess and
  • an amount equal to the discount on national insurance contributions that you received whilst a member of the scheme. This payment will re-instate your entitlement to the state second pension (S2P) in respect of the period of service being refunded. In April 2016 a Single Tier State Pension was introduced and there has been no discounted national insurance rate since then.

The NHS pension scheme and the USS were contracted out of the state second pension scheme (S2P) which meant that a lower rate of national insurance was payable in return for the schemes providing a pension at least equal to the S2P. No state second pension accrued while you are contracted out through your occupational pension scheme. Contracting out ceased when the Single Tier State Pension was introduced in April 2016.

If you are contributing to the 2015 section of the NHS pension scheme and have accrued less than two years' service in the scheme and have a break in scheme membership of five years or more you will be required to take a refund of the earlier service, even if you subsequently return to NHS pensionable employment.

If you have less than two years service in the USS, whilst you can take a refund of contributions if you wish (as described above), you will not be compelled to do so and can retain a deferred benefit in the scheme instead. 

If you have more than two years’ scheme membership, or if you have transferred benefits into the scheme from a personal pension scheme or a retirement annuity contract, you cannot have a refund of contributions from either the USS or the NHS and the accrued benefits built up in the scheme will be deferred unless you choose to transfer them out.

 

What happens to my benefits if I leave them deferred?

Benefits deferred in the NHS pension scheme are increased between leaving and retirement in line with the annual increases determined under the Pensions (Increase) Act 1971. This act currently links increases to the Consumer Prices Index (CPI). 

These deferred benefits are payable at the scheme's normal pension age/State Pension Age or earlier with reductions (please see our FAQ on 'voluntary early retirement')

There are circumstances when deferred benefits can be paid in full before normal pension age/State Pension Age, for example, through permanent incapacity. 

The FAQ on 'pensions increase' gives more information on how the Pensions (Increase) Act 1971 is applied. 

Benefits deferred in the USS are increased in line with increases in the Pensions (Increase) Act 1971.

However:

  • if you were a member of the USS final salary section only, your service prior to 1 October 2011 will receive the full CPI increase.  Thereafter, the proportion of your pension related to service accrued after 1 October 2011 will be increased up to a maximum of 5%.  Where the increase is greater than 5%, one half of the excess above 5% will be taken into account but with an overall cap on increases of 10%.
  • in respect of membership after 1 October 2011, each year’s accrued pension will be increased up to a maximum of 5%. Where the increase is greater than 5%, one half of the excess above 5% will be taken into account but with an overall cap on increases of 10%.

 

Can I transfer my benefits between the schemes?

Yes. However, as the USS is no longer a member of the Public Sector Transfer Club the calculations may not be so favourable.

 

How do I arrange a transfer of pension rights?

You should ask the administrators of the new scheme to obtain a transfer value from the old scheme.  This will enable the new scheme to quote how much pensionable service or income credit can be secured in the new scheme if the transfer goes ahead.  Requesting a transfer value does not indicate any commitment to proceed with the transfer.

 

Are there any time limits on requesting a transfer of benefits between schemes?

Yes. If you are transferring benefits into the NHS pension scheme you must request the transfer within 12 months of joining the new scheme.   Transfers will not be permitted outside of this usually.

If you are transferring benefits into the USS there is no time limit.

 

What factors do I need to consider in reaching a decision about whether to transfer my benefits?

Your decision on whether to transfer or not will depend on your individual circumstances.  The BMA Pensions Department cannot advise you on this and we recommend that you seek independent financial advice before making a decision, if you are unsure as to what is best for you.

As well as the differences in the benefits provided by each scheme section (as described above), a number of other factors may need to be taken into account, such as:

Salary progression - Over time, your salary may rise faster than the rate of inflation. You may also anticipate career progression in the new job.

Salary cap - The USS Retirement Income Builder currently has a contribution cap of £57,216.50.  Whilst the threat of closure of the Defined Benefit section of the USS has been removed this may arise again in the future. The NHS 2015 CARE scheme does not restrict the amount of pensionable earnings that can be used to contribute towards it.

Contribution rate - the current highest contribution rate to the NHS pension scheme (England and Wales) is 14.5%.  The current highest contribution rate to the USS is 8%.  Whilst the USS costs less the Defined Benefit section is restricted to a threshold level of income.

Revaluation of in service benefits v deferred benefits – the increases applied to active service are greater than those applied to deferred benefits.  The NHS 2015 CARE scheme accrues at 1/54th of pensionable pay (uncapped) and active revaluation is based Treasury Orders plus 1.5%.  This means that if the Consumer Prices growth is nil or negative then active revaluation could be less than 1.5%.  The USS Retirement Income Builder accrues at 1/75th of income up to the income threshold (and provides an automatic 3 times lump sum) and active revaluation is linked to official pensions increases and is capped at 10%.  The NHS does not cap the revaluation that can apply to deferred benefits whereas the USS retains the restriction on the amount of official pensions increases it will match and this is currently set at 10%. 

Maintenance of protection (for certain 1995/2008 section members) – an absence of 5 years or more from the NHS 2015 CARE scheme will result in the loss of the ‘final salary’ link to earlier benefits in the 1995/2008 NHS pension sections.  Such benefits will become  deferred and be subject to revaluation in line with the Consumer Prices Index as per NHS pension scheme rules. 

Loss of HMRC protections (potentially) – Enhanced and Fixed protections can be lost on joining a new pension scheme.  This may expose you to greater taxation on retirement if your benefits exceed the Standard Lifetime Allowance prevailing at the time. 

Career planning
You will need to consider which pension scheme you are likely to retire from and when. If you have full protection in either the 1995 or 2008 section, as a result of being within 10 years of your normal retirement age as at 1 April 2012, that protection will be lost if your absence from the scheme is for five years or more.  Your choice will then be to convert your past service to the current scheme terms on a Cash Equivalent Transfer Value (CETV) basis or to leave the deferred benefits.

If you have full protection and return to the NHS within five years you can return to the section of the scheme you left and continue to enjoy full protection.  If you have transitional protection and return to the NHS within 5 years you will return to the section of the scheme that you would have been in at that time had you remained in NHS pensionable service.

Additionally, MHO status cannot be regained if your break from the 1995 section of the NHS pension scheme is for 5 years or more.

MHO status - If you hold MHO status in the 1995 section of the NHS pension scheme you should refer to the section on MHO status below.

Earnings cap - The earnings cap was introduced by the Chancellor of the Exchequer in 1989 and withdrawn in April 2006. It affects members who joined existing pension schemes after 1 June 1989 (or who re-joined after a break of more than twelve months), or who joined a scheme that was set up after 13 March 1989.  Whilst the cap was withdrawn from 6 April 2006 some schemes chose to retain a scheme specific cap. 

The USS removed the cap, from 6 April 2006, in respect of future service accrual only.  However, it has introduced options which enable individual institutions to retain the scheme specific cap beyond 2006 (with the knowledge and consent of the employee).  Alternatively, an institution can make a payment to the trustee company to remove the effect of the earnings cap for past service for any of its capped members.

Please note that if an institution joined the USS after 13 March 1989 but before 6 April 2006, members employed by that institution will be treated as if they joined a scheme set up after 13 March 1989. The earnings cap will apply to service between joining that institution and 5 April 2006.

The NHS pension scheme retained the cap until 31 March 2008.

If, before its withdrawal, you had been affected by the cap, the calculation of your benefits up to the point of the cap’s withdrawal will continue to be calculated with reference to a notional cap (which will be the 2006-2007 cap of £108,600 increased in line with Retail Prices Increases between then and your retirement date, rounded to the nearest amount divisible by £600).

If you have been caught by the cap in the past, or when moving to a USS institution which has chosen to retain a notional cap, any transfer of ‘uncapped’ accrued pension rights into the new scheme will not be subject to the cap. The new scheme must protect and pay pension benefits based on the transferred-in service on the actual full pensionable salary at retirement, while paying benefits for service after joining the new scheme at the capped salary level.

Some concessions from the cap were obtained for NHS pension scheme members. Firstly, you will not be subject to the cap if you returned to the NHS pension scheme within 12 months of leaving. Secondly, if you had transferred to the USS before 1 June 1989 you would not be subject to the cap provided you returned from the USS to the NHS pension scheme before 1 June 1994 and transferred all previous service back into the NHS pension scheme.

 

I am moving from a University post to an NHS post.  Can I have a 'direction' arrangement to enable me to carry on paying into the USS?

No 'direction' arrangements are available if you are moving from a university post to the NHS.  Membership of the USS will have to cease on leaving the university post.


You may wish to consider transferring your accrued USS benefits to the NHS pension scheme as an alternative to retaining your preserved benefits in the USS.  The decision to transfer will need to be taken with due consideration to all the implications for your future pension accrual. Please also take note of the aforementioned time limits. You will need to request a transfer within a year of joining.

 

I have Mental Health Officer status in the NHS pension scheme.  What do I need to consider on taking up an academic post?

The benefits of Mental Health Officer status are unique to the 1995 section of the NHS pension scheme. Any member of that section of the scheme who has worked in a MHO capacity for 20 calendar years or more benefits from doubling their service after 20 years worked.  Only whole years double.  In addition, any MHO who has worked for at least 20 calendar years in such a capacity can retire on unreduced benefits from age 55 onwards. 

Read the MHO FAQ for more details on the qualifying rules and benefits of this status.

If your NHS pensionable service ceases it is only possible for you to regain MHO status if you return to NHS pensionable service within five years.  If your absence from NHS pensionable service is for more than five years it will not be possible for you to regain MHO status in any qualifying NHS posts held in the future.

If you are able to remain in the NHS pension scheme via a 'direction' arrangement then MHO status can potentially continue if your academic post meets the criteria for MHO status.
The MHO FAQ gives more information

If it does not, you will still be able to regain MHO status at any time in the future if you do not cease NHS pension scheme membership.  This option will be particularly important for you if you were over age 45 on 1 April 2012 and in an NHS MHO qualifying role at that time as you will then fall into the 'protected rights' category.  This means that you will be able to remain in the 1995 section of the NHS until you chose to retire and will not have to join the 2015 section.