NHS pension scheme

NHS pension scheme

Opting out

In the past, a number of employees have been persuaded to opt out of their occupational pension schemes and take out personal pension plans (PPPs). financially unwise for the vast majority of doctors.

The BMA guidance on this matter makes it clear that this would be

Contributions

The employee contribution rate is 6% of superannuable income. This attracts tax relief. Scheme members also pay a reduced rate of national insurance contribution.

The employer contribution is 7% of salary in England, Wales and Northern Ireland and 5.5% in Scotland.

Superannuable income

This includes basic salary, London weighting allowance and domiciliary consultation fees. It does not include pay supplements beyond whole time basic salary, temporary additional NHDs or income above earnings cap (£91,800) for doctors who joined the NHS after 1st June 1989.

On retirement, pensionable salary will be the notional whole time salary rate for the position (part-time working is ignored) during the best of the last three years. In most cases this will mean the salary rate applicable during the last 12 months of service.

Pensionable service

The period actually worked in the NHS will count as reckonable service, irrespective of whether it was whole time or part-time. Reckonable service is used for a number of calculations, including the following:

¨ Maximum service limits

(40 years at age 60; 45 years at age 65 in total)

¨ Number of added years which can be purchased

In calculating pension, any part-time working must be scaled down to its whole time equivalent.

Calculation of pension

The two essential elements in calculating pension are pensionable salary and scaled service. The formula used is as follows:

Pension = scaled service / 80 x pensionable salary

Therefore a consultant retiring with 35 years scaled service would have pension calculated as follows:

Pension = 35 / 80 x £66,120 = £28, 928

Index linked pensions

¨ NHS pensions are increased each year in line with the Retail Prices Index

Retirement Age

Normal retirement age in the NHS pension service is age 60 and at that age any doctor may retire and claim the pension. However, it is possible to stay in the scheme up to age 65 and even beyond that up to age 70, if a contract is extended.

Early retirement

A number of options are available

Voluntary early retirement

Doctors may retire from age 50 with an actuarially reduced pension scheme and lump sum. Voluntary early retirement without actuarially reduction is possible if the employer is willing to pay for the extra cost involved.

Redundancy or organisational change

Early retirement with an enhanced pension may be possible in these circumstances.

Ill health retirement

For doctors permanently incapable of carrying out their duties as a result of ill health, an enhanced ill health pension and lump sum may be payable.

Breaks in service

Doctors who work or study abroad for a period or have a break in service for any other reason will need to consider their pension position. If they have been in the NHS scheme for less than two years, and have a break of more than one year, then a refund of contributions is normally payable. This should be avoided if at all possible because pension entitlement accrued to date will be last and the refund will be significantly reduced by taxation and the need to repay national insurance contributions. There are a number of possible ways of avoiding a refund.

Doctors with more than two years in the NHS scheme cannot take a refund and will have a preserved benefit in the scheme. They may therefore wish to consider buying additional service in the scheme to make up for time lost as a result of a break in service.

Further advice

Further advice on the NHS pension scheme can be obtained for the following bodies:

¨ The BMA

¨ England and Wales Scotland

NHS Pensions Agency Scottish Public Pension Agency

Hesketh House 7 Tweedside Park

200—220 Broadway Galashiels

Fleetwood, Lancashire 7D1 3TE

FY7 8LG Tel: 01896 893100

Tel: 01253 774774

¨ Northern Ireland

Health and Personal Social Services