If staff need any information about the current NHS pension scheme and the 2015 NHS pension scheme, they should refer to the ELFS FAQ page in the first instance. For any further questions please contact ELFS Shared Services on tel:01254 786003 or email [email protected]
NHS Pensions update
NHS Pensions offer member events on specific areas of the scheme including understanding the NHS Pension Scheme and its benefits, your Total Reward Statement and Annual Benefit Statement explained and your retirement options explained amongst others.
The link to the page is below.
The Court of Appeal ruling on ‘protection’, known as the McCloud Judgment
In 2015 the government made changes to reform the majority of public service pension schemes. These reforms did not apply to members within 10 years of their normal pension age on the 31 March 2012, who remained in their legacy schemes with ‘transitional protection’.
The Court of Appeal later found this to be discriminatory against younger members in the judicial and firefighters’ schemes – the government accepted that this discrimination existed in all schemes where transitional protection was introduced. It is sometimes referred to as the McCloud judgment.
The period this discrimination will apply is between 1 April 2015 and 31 March 2022, and this is called the remedy period.
The government is removing this discrimination from all public service pension schemes.
If you were a member of the scheme on 31 March 2012 and continued in service between 1 April 2015 and the 31 March 2022 (or your retirement date if earlier), or were a member of the scheme on 31 March 2012 then left service but returned within 5 years, you will be asked to decide which pension scheme benefits you would like to receive for that period.
This is because automatically moving all members back into the legacy pension scheme, without giving you a choice, would leave some worse off, so it is important you choose the scheme benefits that are best for you.
The government published a consultation in July 2020 to look at how best to do this. The consultation set out two ways of asking affected members to make a choice:
- in the near future – this is called the Immediate Choice Exercise
- when you retire – this is called the Deferred Choice Underpin
The government published a consultation response in February 2021. The government has now decided to implement a ‘deferred choice underpin’ which was the approach preferred by the majority of the respondents to the consultation.
Only some members are affected
If you joined a public service pension scheme on or before 31 March 2012 and you were still a member of the scheme on 1 April 2015, you will be asked to choose your pension scheme benefits at the point when your benefits become payable, e.g. when you retire.
Members who received tapered protection in 2015 will also be offered a choice of which pension benefits they receive for any service between 1 April 2015 and 1 April 2022.
How you’ll make your choice
When your benefits become payable, you’ll be asked if you want to receive legacy scheme (1995) or reformed scheme pension benefits (2015) for your service between 1 April 2015 and 1 April 2022. We’ll provide you with information at the time to help inform your decision.
Asking you to make this choice when you retire means you’ll know what you’re entitled to under each option, making it easier to make the right decision for you.
If you’ve already retired, or retire before the new legislation is introduced, we’ll write to you and ask you to make your choice retrospectively. If needed, we’ll backdate all payments to your date of retirement.
Reforming public service pension schemes for all members
To make sure all members are treated equally, from 1 April 2022 all active members, regardless of their age, will be members of the reformed scheme that many of our members are already part of. All legacy pension schemes will be closed, including the 1995/2008 NHS Pension Scheme.
If you are member of the 1995/2008 Scheme, you will keep any service you have earned up until 1 April 2022 in the legacy scheme and you’ll be able to access these benefits in the same way and at the same time as you can now. Any pension benefits you earn on or after the 1 April 2022 will be in the reformed pension scheme.
This ensures the government’s aims of rewarding hardworking public servants, as well as making sure schemes are sustainable and affordable in the future, are met.
Drawdown and the 1995 Pension Scheme FAQs
What is drawdown/partial retirement?
When a pension member reaches age 55 they are eligible to take some of their pension.
Drawdown has always been feature of the 2008 and 2015 schemes and this will now be extended to include members with deferred 1995 scheme membership.
It is available from Saturday 1 October 2023.
This means, if you are eligible, you can take part of your pension and continue to work in a more flexible way.
Am I eligible to apply for drawdown?
To be eligible to apply you must be an active member of the scheme.
You must have held the previous level of pensionable pay for at least 12 months.
You must also reduce your pensionable pay from the date of your drawdown by a minimum of 10%.
From age 55 you can apply to take between 20% and 100% of all your pension benefits in one or two drawdown payments without having to leave your job.
Members with a protected minimum pension age of 50 (membership pre 5 April 2006) can also take advantage of drawdown however if applying before age 55 you will need to take 100% of your benefits.
Do I have to leave and take a break?
No, under the drawdown option you do not have to take a break or leave work though you will have to reduce your pensionable pay by a minimum of 10%.
Can I continue to pay into the pension scheme?
Yes, you can continue to pay into the 2015 section of the scheme and build up further benefits.
I just want to take a lump sum out of my pension. Can I do this?
Drawdown is not a lump sum cash only payment.
It is a % of your monthly pension benefits and lump sum, if applicable, that have built up at the time of your drawdown.
I just want to take a lump sum out of my pension. Can I do this?
Drawdown is not a lump sum cash only payment.
It is a % of your monthly pension benefits and lump sum, if applicable, that have built up at the time of your drawdown.
Will I be paid my chosen % in full?
If you choose to take your pension before your normal pension age then any benefits will be reduced.
Details of the % reduction can be found on the early retirement factsheet on the NHS Pensions Agency website and is dependent on your age at the time you take your pension.
Please remember that if you do this before age 55 then you must take 100% of your pension benefits.
Can I have an estimate of how much I will get if I drawdown my pension?
No. Drawdown estimates can only be produced by NHS Pensions.
They have advised that their systems will not be updated to provide 1995 member drawdown estimates until after the 1st October 2023.
They are currently in talks with the DOHSC to develop a calculator for members to use.
Local administrators have asked NHS Pensions to provide a communication to members about this.
This is not ideal as members who want to take advantage of drawdown sooner rather than later will be doing so without any indication of the benefits payable however neither we nor NHS Pensions are able to accommodate these requests.
However, if you wish to drawdown 100% of your 1995 benefits your Total Reward Statement (TRS) will hold estimated figures but remember to apply the early retirement reductions from the NHS Pensions Early Retirement Factsheet if applicable as outlined above.
I want to apply for drawdown how do I do this?
Until full guidance is received from NHS Pensions later in the summer, we are not able to advise how the application process will work however, as mentioned previously, all applications will be subject to an application process and will require written employer approval.
The process will also need to be incorporated into local policies and we will work with your employer to develop this.
It is expected that there will be the same four month application period required for all other types of retirement.
NHS Pensions are developing a new drawdown application form for member applications which will be made available later in the year.
April 2016
There are lots of changes to state pension rules and arrangements which came into effect on the 6 April 2016, which will impact on every member of staff in varying degrees.
You may be surprised at how much this affects you, so please take the time read about the changes below so you can discuss with a financial adviser if necessary.
The current means-tested state pension will be replaced with a simplified, single-tier system. Changes will apply to you if you reach state pension age on or after 6 April 2016, or in other words if you are: a man born on or after 6 April 1951 or a woman born on or after 6 April 1953.
The changes will affect the amount of National Insurance contributions you pay if you are an active member of the NHS pension scheme. Staff in the NHS pension scheme will pay an extra 1.4% in National Insurance contributions from 6 April 2016.
The state pension changes will not affect your NHS pension. However, the changes may have an impact on your take home pay.
The current state pension consists of two parts; the basic state pension and the additional state pension. Members of the NHS pension scheme pay a lower rate of National Insurance contributions because they contribute to the NHS pension scheme instead of the additional state pension. This is known as ‘contracting out’.
As the new state pension will only have a single tier, contracting out will end and members will no longer receive a reduction in the amount of National Insurance contributions they pay towards the state pension scheme. Therefore, from 6 April 2016 formally contracted out employees will pay an extra 1.4% in National Insurance contributions.
For higher earning staff there are also changes to the lifetime allowance and the annual allowance.
National insurance
The state pension scheme is to be simplified for people retiring after 6 April 2016. Your state pension is based on the national contributions you have made over your working life.
This means:
- If you are currently paying into the NHS pension scheme you will pay slightly more national insurance from April 2016.
- The deduction from your pay will increase and you will pay 1.4% more national insurance contributions.
- For the length of time you were paying into the NHS pension scheme prior to April 2016, as you were paying reduced national insurance (NI) contributions, your NI record for number of years paid will be reduced.
Lifetime allowance
Lifetime allowance was introduced in 2006. This is the maximum amount an individual can build up in all of their pension savings, and was originally set at £1.5 million. From 1 April 2016 it will reduce to £1 million. Any savings above this amount will be subject to a tax charge payable on receipt of your pension.
Annual allowance
The annual allowance was also introduced in 2006, this is the maximum amount an individual can contribute, or in the case of the NHS pension scheme accrue in any 12 month period, and not incur a tax charge. There is also a three year carry over for any unused allowance.
In April the allowance will remain at £40,000. However for individuals earning over £150,000 per annum, their annual allowance will reduce by £1 for every £2 earned, resulting in a minimum annual allowance of £10,000, for those earning £210,000 and above.
Affinity Connect pre retirement courses.
There are a number of courses available to employees considering retirement within the next three years.
The courses aim to encourage a positive and realistic approach to a financially secure retirement and help employees make informed choices about retirement.
The courses are run by Affinity Connect, a specialist provider of financial education in the workplace for the public sector.
These courses are perfect for you if you are within 3 years of retirement and require more information about how to maximise retirement savings.
During the course you’ll learn how to:
- Help you plan for the lifestyle changes ahead
- Maximise the benefits of your State and workplace pensions
- Make the most of your tax-free cash
- Understand the income options available from your pension
- Achieve your retirement goals
Please note the courses will provide information only and will not include or constitute regulated financial advice.
Please see below current courses that are available: