IMPORTANT CHANGES TO THE NHS PENSION SCHEME
From 1 April 2008 the NHSPS became two
schemes; with new entrants joining the new NHSPS (new scheme) and existing
members and deferred members who rejoined the scheme before 1 October 2008
remaining in an amended version of the current NHSPS (current scheme). Other
members of the current NHSPS are not affected by the changes unless they
re-entered NHS pensionable employment after 1 April 2008.
Who can remain in the current NHSPS?
- Members in pensionable
service as at 1 April 2008
- Members in pensionable
service as at 1 April 2008 who subsequently defer their benefits and then
rejoin the NHSPS within 5 years of leaving
- Deferred members as at
1 April 2008 who rejoin the NHSPS prior to 1 October 2008 or after 1
October 2008 but within 5 years of leaving
- Those leaving the scheme with less than two years service (i.e. no deferred benefits) and returning to the NHS within a year will have the option of which scheme they rejoin
Who will join the new NHSPS?
- Members who join the
NHSPS for the first time on or after 1 April 2008
- Members in pensionable
service as at 1 April 2008 who defer their benefits and then rejoin the
NHSPS more than 5 years after leaving
- Members of the current NHSPS who elect for all of their past and future service benefits be transferred to the new scheme during the choices exercise which begins in July 2009
So how are you affected?
The previous flat 6% cost is now tiered, depending
on your earnings:
Up to GBP 19,682 - 5%
Up to GBP 65,002 - 6.5%
Up to GBP 102,499 - 7.5%
GBP 102,500 plus - 8.5%
As you can see, your contributions are directly related to your income.
If your NHS basic salary is, say, GBP 90,000, you are currently contributing GBP 6,264 p.a - although this is gross and you get tax relief on these
figures (meaning as a higher rate taxpayer you would only actually pay GBP 3759 on the latter
figure).
Other key changes are:
You retain the normal retirement age of 60,
or age 55 in certain special cases such as Mental Health Officers.
The earnings cap for hospital based individuals
is abolished. So, although higher earners will be paying more as above,
you will benefit from a real pension increase if your NHS earnings are above GBP 112,800 pa. (e.g. if you have a merit award).
For General Medical Practitioners, your
pensionable earnings revaluation on dynamisation will now be determined by the
retail price index plus 1.5%, rather than the increases in each practitioner
profession.
A key change for benefits to partners on death
have also been announced. Qualifying partners now include someone you have
nominated who you have an exclusive and long-term committed relationship with
for at least two years and who is financially dependant or inter-dependant. In
addition, if such a partner were to remarry or cohabit, they keep their
survivor pension (a huge benefit).
It should be mentioned here that the ill health
retirement rules are being reviewed seperately, and this review is due to
report early next year. As these are very important benefits, we will update
you when there is more news.
Buying extra pension benefits has also got new
rules, one of them bringing the NHS scheme in line with the overall 'A DAY'
pension changes that were introduced in April 2006. This means you can
contribute as much as you earn. Secondly, the option of Added Years is being
removed entirely - existing contacts will be honoured - (you need to have your
application in by the end of March 2008 if you wish to use this route). The
replacement is called 'buying additional pension, with a maximum of GBP 5,000 per
annum.
At retirement, you can take your pension and
lump sum as usual, but there is an option to commute some of the pension to
give more lump sum. As this lump sum is tax free, it may well prove popular.
For example, for someone with around 36 years service and an NHS income of GBP 100,000 pa:
Typical pension/lump sum - GBP 45,500/ GBP 136,500
Option pension/lump sum - GBP 36,500/ GBP 244,000
What is the position of members who were in
receipt of benefits prior to 1 April 2008?
NHS pensioners who retired before 1 April 2008
will be unaffected by any of these changes.
What is the position of members who were active
on 1 April 2008 but retired before being given the option of transferring to
the new scheme?
Members who are active members of the current
scheme on 1 April 2008 but retire before being given the choice to move to the
new scheme will be given the opportunity to join the new scheme if they return
to NHS employment. They will be required to have a 2 year break in pensionable
employment between taking benefits and joining the new scheme. It is proposed
that the choice exercise (on whether to transfer to the new scheme) will take
place in July 2009 so members intending to retire between 1 April 2008 and 30
June 2009 may fall into this category.
We have not covered all the various changes
here. Make sure you are aware of how these changes affect your benefits.