What happens if I am made redundant?
If you have more than two years’ of qualifying 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.
Get help in confirming the accuracy of this payment by calling the BMA on 0300 123 1233.
If you are over the minimum pension age 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?
For members of the 1995 section of the scheme the minimum pension age increased from 50 to 55 with effect from 6 April 2010.
Those entitled to a minimum pension age of 50, as at 6 April 2006, will continue to retain that right if they remain in the 1995 section of the NHS pension scheme. Members of the 2008 section of the NHS pension scheme will automatically have a minimum pension age of 55.
If you are 50 or over (in the 1995 section of the scheme) or 55 or over (in the 2008 section of the scheme) and have at least two years’ membership you will be able to draw your accrued pension benefits from your date of redundancy, should you wish to do so.
Do I qualify for immediate payment of my pension?
If you are under the scheme minimum pension age you are not able to draw your pension immediately on redundancy. The benefits will be deferred in the scheme and will be payable at the scheme normal pension age. Alternatively the deferred pension can be paid with a reduction before the scheme normal pension age.
If you are over the minimum pension age you can opt to use the redundancy payment to fund the payment of an unreduced pension.
Where the cost of the early payment of benefits is less than the redundancy payment, the difference will be paid to you by your employer.
Where the cost of funding unreduced pension benefits is greater, any shortfall will be met by your employer.
Alternatively, if you are over the minimum pension age, you can take the full redundancy payment and access your retirement benefits with an actuarial reduction. Benefits can also be left preserved in the scheme.
If you have reached the normal pension age of the scheme you will be able to take the redundancy payment in full and simply retire and access your full pension entitlement.
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 and simply continue in pensionable service in your ongoing NHS post and in any subsequent post undertaken
- if you are contributing to the 1995 section and you are made redundant between age 50 and 55 it will only be possible to access your benefits from all of your posts. It will not be possible to access benefits solely from the redundant post
- if you are over the age of 55, you can use your redundancy payment to enable an unreduced pension to be payable only in respect of the redundant post. You can then continue in NHS pensionable service in the ongoing post and in any subsequent NHS post undertaken
- 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.
Do I need to pay tax on my redundancy payment?
The first £30,000 of your redundancy payment 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).
From April 2018 employer and employee National Insurance contributions will be deducted from payments above £30,000 (which are currently subject to income tax but not National Insurance).
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. This option is available to members of both the 1995 and the 2008 sections of the scheme.
Can I return to work in the NHS following redundancy?
You can return to NHS employment following redundancy.
In cases of early retirement on the grounds of redundancy, organisational change or in the interests of the efficiency of service, a break of only one day is sufficient to claim your pension.
There are restrictions which affect eligibility to retain your full redundancy payment if you return to NHS employment. Call the BMA 0300 123 1233 for 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.
Can I rejoin the NHS pension scheme after opting to take my pension early following redundancy?
That depends on which section of the scheme you retired from.
If you were a member of the 1995 section of the scheme, you cannot rejoin NHS pensionable service following retirement. The 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.
If you were a member of the 2008 section of the scheme it is possible to continue membership in the scheme immediately after 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?
If you return to work after claiming your pension following redundancy, your NHS pension will be unaffected.
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 continue to be payable if I return to work?
CEAs 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 retire early because of redundancy:
- a credit will be given for any added years purchased. The size of this credit will depend upon the proportion of the 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
- 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. 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.
What costs does my employer have to meet?
Employers are required to meet the following costs of redundancy, organisational change and redundancy in the interests of the efficiency of the service:
- If your redundancy payment is insufficient to meet the cost of funding the payment of unreduced benefits then your employer will meet the shortfall.
- The redundancy payment (not applicable in the case of redundancy in the interest of the efficiency of the service).
I am ‘drawing down’ part of my pension from the 2008 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.
I am a Mental Health Officer (MHO), how does redundancy affect me?
If you are made redundant and defer taking your benefits, you will retain a normal pension age of 55 (provided that you have had more than 20 years’ service as an MHO) and you will be able to access your accrued benefits in full from this age onwards.
If you claim immediate payment of your pension between the ages of 50 and 55 on being made redundant, abatement will not apply to you if you return to NHS employment.
If you claim immediate payment of your pension between the ages of 55 and 60 on being made redundant abatement may apply if you return to NHS employment.
Further information is available in our MHO and Abatement FAQs.
What if I am a GP and am being made redundant from my secondary care post?
If you ceased practising as a GP more than twelve months before being made redundant, your GP pension will become payable in full if you retire from all your posts.
However, if you ceased to practise less than twelve months ago or are still practising, the following options are available:
- you can accept the redundancy payment in respect of the secondary care post and continue in pensionable GP employment and any subsequent secondary care posts undertaken
- you can use the redundancy payment to fund the unreduced payment of your benefits from your hospital post only if you are over age 55. There are three options available for your GP pension:
- you can claim your concurrent GP benefits prior to the scheme’s normal pension age and consequently the benefits will be actuarially reduced. If you claim benefits after your normal pension age, they are payable to you in full.
- you can defer accessing your GP benefits until a later date.
- you can simply continue in pensionable GP employment.
I am not directly employed by the NHS. How does redundancy affect me?
This depends on who your employer is and which pension scheme you are contributing to. There are three categories:
(a) if you are employed by the NHS and are a member of the NHS pension scheme,
(b) if you are employed by a university or medical school or another organisation and have retained your NHS scheme membership under special arrangements (known as the ‘Direction’ arrangements),
(c) if you are employed by a university or medical school or another organisation and are a member of the their occupational pension scheme.
Category (a) – are eligible for NHS pension and redundancy benefits on redundancy in the normal way, as described previously.
Category (b) – this depends on the exact formulation of your employer’s Direction arrangement. If this applies to you call the BMA Pensions Department for further guidance.
Category (c) – your employer’s pension scheme may or may not provide the same options as the NHS pension scheme. Please refer to the individual scheme rules for further assistance and contact the BMA Pensions Department for guidance.