Your final pensionable pay

As a secondary care doctor in the 1995 section of the NHS pension scheme, or who has since transitioned to the 2015 scheme, this guidance can help calculate your final pensionable pay.

Location: UK
Audience: SAS doctors Consultants
Last reviewed: 30 October 2020
Piggybank illustration

What is final pensionable pay?

Your final pensionable pay is the pensionable income paid during the best year of the last three years of pensionable service. If you are working part-time or beyond whole-time hours it is your whole-time equivalent pensionable salary that is used.

If you are now in the 2015 scheme your 1995 section benefits will continue to be linked to your post 2015 final pensionable pay for so long as you do not have a break in pensionable service of five years or more. Should you have a break in pensionable service of five years or more your 1995 section benefits will be linked to the best of the last three years pensionable pay leading up to the break.


How the best of the last three years is determined

  • At the end of each scheme year (1 April to 31 March) your employer is responsible for notifying the pensions agency of your annual pensionable earnings.
  • When you retire or leave the NHS, your employer will advise the relevant pensions agency of your pensionable earnings during the three years leading up to your retirement/departure from the NHS.
  • The best year will be used to calculate your pension.
  • Those in the 2015 scheme account will need to be had of any break of five years or more as the referencing period will lead up to that.
  • The last 12 months of service usually produces the highest income of the final three years.
  • If you previously earned a higher income (for example from a medical or clinical director post), which finished a year or two before retirement then an earlier year may be better.
  • If your pay changed during three years your final pensionable pay will be a composite figure.


If you receive a backdated increment

For the purposes of assessing your final pensionable pay any backdated pay will be apportioned to the years to which they relate and not in which they were paid.

For example, if you receive a lump sum of £30,000 during your final year before retirement but the payment relates to arrears of pay spread over the three years leading up to retirement, then £10,000 will be apportioned to each year of pensionable pay during the referencing period.

When testing your pension growth for the purposes of the annual allowance, HMRC advises that backdated pay is credited in full in the year it is paid. However, if the arrears partially or wholly relate to earnings in earlier years we suggest that you ask your employer to inform NHS pensions of your earnings in each year. This should ensure that the back payment does not get treated solely as relating to the year it was received.


If you have more than one job

Your pensionable pay is calculated with reference to each employment separately. In the calculation of your benefits, the number of hours worked in each employment is taken into consideration.

An example of this is as follows:


Employment one Employment two
Programmed activities 6/10 2/10
Pensionable pay £79,000 £95,000

Total number of PAs per week: 8
Salary employment 1: £ 79,000 X 6/8 = £ 59,250
Salary employment 2: £ 95,000 X 2/8 = £ 23,750

Final pensionable pay = £83,000

*Whole-time equivalent


Sick leave

  1. If you are out of NHS employment for any reason during the last three years immediately preceding your retirement, the referencing period will be extended to include three full years of 365 days of pensionable pay. This also happens if you are on nil pay due to sickness.
  2. If you are on reduced pay on account of sickness this will not affect your final pensionable pay which is always based on notional whole-time equivalent pensionable earnings.
  3. If you are on nil pay on account of sickness the referencing period will be extended to ignore periods where you were in receipt of nil pay. NHS pensions sometimes refer to these days as disallowed days.


Stepping down into a lower paid job

This will affect your final pensionable pay if you are to retire more than two years after the date you stepped down. However, if you are over age 50, and have reduced your pensionable pay and responsibilities by at least 10% you can apply for voluntary protection of pay. This means that the pension accrued up to the point of the step down will be based on the higher pay.

If you have transitioned to the 2015 scheme you are still able to apply for voluntary protection of pay (in relation to your accrued 1995 section benefits) so long as the facilities criteria are met.

If you have reduced your hours, providing that you have remained in the same role, this will not affect your final pensionable pay, which is always based on notional whole-time equivalent earnings.


Which elements of my pay are pensionable?

Generally speaking, income is treated as pensionable if it is regular, likely to continue and relates to normal duties.

Pensionable income currently includes:

  • basic salary
  • distinction awards
  • discretionary points
  • intensity payments or on call supplements
  • clinical excellence awards (their pensionable position may alter prospectively further to the consultant contract negotiations. Pay protection may be applied for should this payment cease to be pensionable in future)
  • availability supplements
  • high-cost living area allowance
  • additional income from clinical or medical director posts (if included within a whole-time contract)
  • chief officer supplements for doctors in public health medicine
  • domiciliary visit fees. Pension resulting from this is calculated separately using unscaled (calendar) service as pensionable service.​


Final pay control

Final pay control is applicable to the 1995 section of the pension scheme. It also applies to those who have retained final salary linking to the 1995 section (by not having a break in pensionable service of five years or  more) but have transitioned to the 2015 scheme.

From 1 April 2014 in England, Wales, 1 April 2015 in Northern Ireland and from 1 July 2014 in Scotland, a penalty may be applied to an NHS employing authority, including GP practices where a scheme member is awarded an increase to pensionable pay which exceeds an ‘allowable amount’.

The ‘allowable amount’ is the lesser of the pay itself or the pay in the previous year increased by CPI (from February) plus 4.5% or the percentage increase in the current years pay compared with the previous years’.

If the allowable amount is exceeded in any of the three years leading up to retirement (or any three years when final pensionable pay is calculated for the purposes of ascertaining benefits) then the employer may be liable
for a charge. The individual’s pay will not be capped. The charge does not apply where benefits are payable as a result of death in service or in deferment.

This means that additional costs may be incurred by the employer/practice if scheme members retire or leave the NHS pension scheme within three years of receiving this type of award.