Redundancy and your pension

This guidance for doctors covers being made redundant from the NHS, eligibility, how it affects your pension and different employment factors to consider.

Location: UK
Audience: All doctors
Updated: Tuesday 27 April 2021
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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 should you be made redundant.

Details of the exact amount of compensation will be provided by your employer. Get help in confirming the accuracy of this payment by contacting the BMA.

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.

 

Eligibility for pension

What is my minimum pension age?

If you are in the 1995 section, your minimum pension age is 50 (so long as you had service between 31 March 2000 and 5 April 2006). If you don’t meet this criteria, then your minimum pension age is 55.

If you are in the 2008 section or the 2015 scheme, your minimum pension age is 55.

If you are 50 or over (in the 1995 section of the scheme) or 55 or over (in the 2008 section/2015 scheme) and have at least two years’ membership, you will be able to draw your pension from your date of redundancy, should you wish to do so.

Can my pension be paid immediately?

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 and will be payable at the scheme normal pension age. Or, the deferred pension can be paid with a reduction from the scheme minimum pension age.

If you are over the scheme minimum pension age your pension is payable with the appropriate actuarial reduction.

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 unreduced pension entitlement.

See above for pension ages.

What if I am being made redundant for 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 the 1995/2008 sections and the 2015 scheme.

Your employment

What if I have more than one job?

The options available to you are outlined below If you are only made redundant from one job.

  • You can 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.
I am not directly employed by the NHS

This depends on who your employer is and which pension scheme you are contributing to. There are three categories.

  1. If you are employed by the NHS and are a member of the NHS pension scheme.
  2. 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).
  3. If you are employed by a university or medical school or another organisation and are a member of their occupational pension scheme.

Doctors in category 1 - are eligible for NHS pension and redundancy benefits on redundancy in the normal way, as described previously.

Doctors in category 2 - this depends on the exact formulation of your employer’s direction arrangement. If this applies to you, contact us for further guidance.

Doctors in category 3 – your employer’s pension scheme may or may not provide the same options as the NHS pension scheme. You should refer to the individual scheme rules for further guidance and contact us for guidance.

I am a GP who is being made redundant from a secondary care post

If you ceased practising as a GP more than twelve months before being made redundant, your GP pension will become payable if you retire from all your posts.

If you ceased to practise less than twelve months ago or are still practising, 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.

Or, 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 without a reduction.
  • You can defer accessing your GP benefits until a later date.
  • You can simply continue in pensionable GP employment.
I have mental health officer status

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). You will be able to access your pension without an actuarial reduction from this age onwards.

If you claim immediate payment of your pension between the ages of 50 and 55 on being made redundant, abatement *LINK* 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.

I am moving onto the 2021 SAS contract

Doctors moving onto the 2021 SAS contracts are agreeing to different terms in relation to any redundancy payment due. You will be bound to the agenda for change terms and conditions.

The payment

Do I need to pay tax on the 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 (an ex-gratia payment), this is tax-free but only within the £30,000 limit.

You may not have to work your notice period but continue to get paid by your employer. This is taxable in full unless it is paid as a result of breaching a requirement to give notice. In this 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 compensation for breach of contract.

National insurance contributions are also deducted from payments above £30,000.

This 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 HMRC or your accountant.

What happens to any additional pension I have built?

Added years

A credit will be given for any added years purchased. The size of this credit will depend on how much of the added years contract 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.

Additional pension

A credit will be given for any additional pension purchase made. The size of this credit will depend upon how much of the purchase has been completed.

An actuarial reduction will apply as the benefits will be paid earlier than the intended retirement date.

If you pay by regular contributions, the contributions will be refunded if retirement takes place within twelve months of commencing the purchase.

If you paid by a single lump sum and retirement takes place within twelve months of making the payment, the purchase is nonetheless included in the benefits payable.

AVCs

The accumulated value of any AVCs (additional voluntary contributions) or FSAVCs (free standing additional voluntary contributions) can be taken at the same time as your NHS pension on early retirement. This need not be the case, however, and the purchase can be deferred.

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.

Is redundancy pay pensionable?

The redundancy payment is not pensionable and therefore doesn't include pension contributions.

Returning to work

Can I return to work?

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. Contact us 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.

How will my pension be affected if I return?

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. Read our guidance on abatement for further information.

Can I rejoin the pension scheme?

If you opted to retire early following redundancy, you may be able to rejoin the pension scheme depending which section you were in at retirement.

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 or the 2015 scheme it is possible to continue membership in the scheme immediately after retirement. This is if you have not reached the scheme membership limits of 45 years’ of pensionable service or age 75.

If you transitioned to the 2015 scheme from the 1995 section and retained a final salary link for the 1995 section then you will not be able to rejoin the NHS pension scheme.

Does my CEA continue to be payable?

Ongoing CEAs (clinical excellence awards) are not payable after retirement. New awards can be applied for.

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.

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