NHS Scheme FAQs
1. Pension schemes from 1 April 2022
2. Differences between the legacy (final salary) and reformed (CARE) schemes
The main changes between the legacy and reformed schemes are;
- a change to career-average pension schemes from final salary
- an increase in normal pension age
The change to career average means your pensions are now calculated on your average salary throughout your career as opposed to the average of your best three consecutive years pay in the 10 years leading up to your retirement date.
3. Benefits of remaining in the reformed scheme from 1 April 2022
The 2015 schemes that were introduced following the recommendations of the Independent Public Service Pensions Commission.
The reform schemes aim to deliver an affordable and sustainable pension, whilst also being fairer to lower and middle earners.
The reformed schemes are some of the most generous available in the UK:
- backed by the taxpayer
- offering guaranteed benefits on retirement
- comparing very favourably to the typical private sector scheme
We understand that some members may feel anxious about moving to the CARE scheme and fear that their final salary pension benefits are being removed. To reduce this anxiety, we have produced a short article that addresses a few of the myths we are aware of (opens in a new tab).
4. Retiring after 1 April 2022
The NHS 1995 and 2008 legacy schemes will be closed to any future pension build up from 1 April 2022. This means that members who choose to retire after this date will receive both legacy and reformed scheme benefits.
Members who are moved into the 2015 reformed scheme from 1 April 2022 will not have to wait until their State Pension Age (SPA) in order to claim their pension benefits.
If you have built up pension in either the 1995 or 2008 scheme – you will still be eligible to retire at the Normal Pension Age (NPA) set out by these schemes.
This means that members of the 1995 scheme can claim pension benefits at age 60 and members of the 2008 scheme can claim at age 65. Claiming at NPA means you will not receive an early retirement reduction on your legacy scheme benefits.
However, if you choose to retire at your legacy schemes NPA, you will receive a reduction in pension for any 2015 benefits built up between 1 April 2022 until your retirement date. This is because the NPA of the reformed scheme is set at your State Pension Age (SPA). You will be able to defer these benefits until your reach your SPA.
This gov.uk calculator can help you find your State Pension Age (opens in new tab).
5. If you retire before the introduction of the ‘deferred choice underpin’ (DCU)
If you retire before the DCU is implemented, your pension will be calculated based on your current circumstances. We will then contact you once the necessary legislation and support processes are in place to give you your choice between final salary and CARE benefits for the remedy period.
Once this choice is made, any pension due to you will be backdated to your retirement date.
6. Members who received tapered protection
If you received tapered protection when the CARE scheme was introduced in 2015, you will be offered a choice of whether to receive final salary or CARE scheme benefits in relation to any continuous service between 1 April 2015 and 31 March 2022.
7. Pension changes and tax
The tax position of some members may change over the remedy period.
For some high earning members, the pension changes may cause your tax position to change, which could result in additional tax charges, or a reimbursement of tax previously paid.
In some cases:
- the pension changes may mean that you will have to pay new or higher annual allowance charges, but typically only where your projected pension at retirement has increased.
- adjustments to lifetime allowance charges may be required, where retired members’ accrual changes.
- you may also face changes in your contributions in respect of the remedy period, which may also affect your income tax position.
- if you are already retired, your total pension income may also change, and tax will be payable on any increase in your pension.
8. Ill Health Retirement (IHR) cases to be reviewed
All Ill Health Retirement cases (including members refused IHR) will be reviewed by SPPA as soon as possible. This will involve reconsideration of cases where there may have been a different outcome (or higher pension award) under the alternative scheme.
Further information relating to Ill Health Retirement can be found in Annex A (page 51) of HM Treasury’s response to the 2015 remedy consultation (opens in new tab).
9. Members who opted out of the pension scheme on or before 31 March 2015 and have not opted back in
If you opted out of the pension scheme on or before 31 March 2015 and have not been in either a legacy or reformed scheme since that date, you may not automatically be considered to be in-scope for the remedy process. This is because you will not have any pensionable service built up in the remediable period.
Some members in this position may consider that they would have taken a different course of action had they known that continued membership of their legacy scheme during the remedy period was an option. The UK government have included provision that will allow scheme members to elect to buy back opted out service between 1 April 2015 and 31 March 2022. The intention is that members will need to make a claim to the pension scheme in order for opted out service to be considered for buy back. Supporting evidence may be required with these claims.
The process is not yet finalised and guidance is being developed for cases where members wish to show they have taken such contingent decisions about their scheme membership. Consequently, there is no requirement at this time for members to log with their employer or the SPPA their intention to buy back remediable service. You may wish to note that given the position is not yet finalised, it remains unclear if an options exercise for purchasing remedy service will include the opportunity to extend that purchase to cover any period of non-membership between 1 April 2022 and 30 September 2023.
The implementation of this and all other aspects of the 2015 Remedy must be finalised by 1 October 2023. The SPPA website will be updated with more information as soon as it is available.
10. Members who may have made decisions about their pension prior to the McCloud / 2015 Remedy changes being announced – Contingent Decisions
Some members who are impacted by the 2015 Remedy pension scheme changes may have made decisions about their pension.
We understand that these members may have made a different decision had the discrimination that was identified by the courts not occurred. This is known as a contingent decision.
The processes and guidance for members who wish to show they have taken such contingent decisions about their scheme membership is being developed. The implementation of this and all other aspects of the 2015 Remedy must be finalised by 1 October 2023.
We will update our website as soon as all contingent decision processes' and guidance are in place to support you.
11. Transitional members who hold Lifetime Allowance Fixed or Enhanced Protection
When the UK Government introduced lifetime allowance (LTA), they also brought in protections through HM Revenue and Customs (HMRC), including fixed and enhanced protection, that allowed members to keep existing savings limits over the LTA threshold.
From 31 March 2022 all scheme members who are not already in the 2015 Scheme will be moved and start to accrue pension in that scheme on 1 April. This will impact members who hold fixed or enhanced protection.
HMRC rules dictate that members with fixed or enhanced protection, who move to the 2015 scheme from the 1 April 2022, will lose their protection if they accrue benefits under that scheme. Members will need to decide whether or not they want to retain their protections before 31 March 2022 and should consider taking independent financial advice to aid that decision.
Members who move to the 2015 Scheme and subsequently lose enhanced or fixed protection are required to notify HMRC within 90 days of the loss taking place. Members who start to contribute to the 2015 Scheme on 1 April 2022, will need to notify HMRC by 30 June 2022.
To avoid losing this protection scheme members may wish to opt out of the pension scheme on 1 April 2022. In doing this they will retain any fixed or enhanced protection but will not accrue any further pension entitlement.
Further information about protections can be found in the HMRC Pensions Tax Manual, in particular the section on protection from the lifetime allowance charge.