When you can have your contributions refunded
- Historically 1995/2008 section members could claim a refund of contributions if you had less than two years’ service at the date of your leaving, or opting out of the pension scheme.
- Historically 1995/2008 section members were obliged to take a refund if they had a break of 12 months.
- Since 1 April 2022 all active members are contributing to the 2015 scheme. Service in the 1995/2008 section counts towards the two years’ qualifying service required to preserve benefits. Members will be obliged to take a refund if they have a break of five years or more.
When you cannot have your contributions refunded
- If you have more than two calendar years’ of service your pension is preserved in the scheme and a refund is not possible. Benefits can be transferred to another scheme or left to be accessed from minimum pension age or later if pensionable service does not resume to continue building on the benefits.
- If you joined the 2015 scheme having previously contributed to the 1995 or 2008 section, the qualifying service in the 1995 or 2008 section is aggregated with qualifying service in the 2015 to determine whether a refund is payable.
- If you have less than two years but have transferred pension rights from a personal pension plan or retirement annuity contract.
- If you have reached your normal pension age. This is linked to your State Pension Age in the 2015 scheme.
How to apply for a refund of contributions
If you are eligible for a refund you can apply immediately after leaving the NHS.
If you do not apply for a refund the relevant pensions agency will write to you once you have incurred a disqualifying break (this was a break in service of 365 days or more in the 1995/2008 sections or a break of five years or more in the 2015 scheme). The letter will inform you of how to apply.
Is a refund good value for money?
Generally speaking, it isn’t. This is because:
- all pension benefits built up so far are lost
- employer contributions paid to the scheme are not refunded to the member
- the refund is taxed at 20% if the refund is less than £20,000 and 50% on any amount above this level
- there will be extra national insurance contributions to pay. This is only relevant to contracted out service prior to 6 April 2016. Since this date there has been no contracting out as a single tier state pension is in place and reduced NI does not apply to those contributing to the NHS pension scheme.
- Interest is not payable on the refund where you have chosen to leave the scheme. In other circumstances (excluding where employment was terminated by reason of the natural end of the contract or by misconduct) interest is compounded at 2.5% annually.
Can I avoid taking a refund?
This might be possible in the following ways:
- return to NHS pensionable employment within five years (2015 scheme members). Even if this is just for one day, this will ensure that a disqualifying break is avoided. This post must be pensionable. Agency work is usually not pensionable (unless it is via a direct engagement model) and would therefore not be sufficient to avoid a disqualifying break
- work for an organisation covered by a direction arrangement. If you work for a direction employer, your NHS membership will be seen as continuous and you will not incur a disqualifying break. You should check with any non NHS employer if they are subject to a direction and if they are ensure you are enrolled in the NHS pension scheme on joining.
- take a period of approved unpaid leave or a sabbatical and continue to pay pension contributions. It may be possible, at your employer’s discretion, to agree a period of unpaid leave from the NHS, whilst continuing to pay contributions. If this unpaid leave exceeds six months you will be required to pay the employer contributions as well as the employee contributions. Please see our guidance on authorised absences
- continue to pay contributions during maternity leave. For more information on this, please see our guidance on maternity, paternity, adoption leave
- obtain ‘approval’ to avoid a break in service caused by illness
- obtain ‘approval’ for periods of work, training or study, this can include periods where you have been working overseas.
- transfer your benefits into another pension scheme. Individuals who have not met the preservation requirements are still able to transfer to personal pension plans and other DC schemes.
If you left the scheme prior to 6 April 1988 with less than five calendar years of service, the preservation requirements would not have been met and after a 365 day break this earlier service is disqualified. You may be able to use one of the above options, particularly ‘approval’ for a historical break to avoid refunds in these circumstances.
Pensions refund letter without having left the NHS
You might receive this notification because you have changed jobs and are now working in the NHS but in a different part of the UK. Your NHS pension is administered separately between the nations and does not automatically follow you on moving jobs. There are separate schemes in Scotland, Northern Ireland and in England and Wales.
You will need to initiate a transfer yourself and should do this as soon as possible (and no later than 12 months after taking up your new post). Please refer to our guidance on transfer of pension rights.
Additionally, if NHS pensions were unable to pay a refund following a disqualifying break as they did not have your contact details they will look to do this now even if you have since returned to NHS pensionable employment. It may only be possible to avoid this if your break is retrospectively approved.