Article

2015 NHS Pension Scheme

A summary of the arrangements for the 2015 NHS Pension Scheme.

3 October 2018

Find out more about the 2015 NHS Pension Scheme, which came into force on 1 April 2015.

The 2015 Scheme was introduced on 1 April 2015. This scheme has different features to the previous 1995/2008 Scheme, a summary is below.

All new joiners without previous scheme membership will join the 2015 scheme.

Further information

  • Defined benefit scheme which pays a pension based on the average of a member's pensionable earnings throughout their whole career.

    • The value of pension earned in each year is calculated using an accrual rate of 1/54th of pensionable pay.
    • Revaluation of active members benefits in line with the Consumer Price Index plus 1.5 per cent per annum.
    • Normal Pension Age (NPA) at which benefits can be claimed, without reduction for early payment, will be linked to the same age as a member is entitled to claim their state pension.
    • No limit on the number of years pension you can build up.
    • Final pension calculated by adding together all of the revalued pension earned in each year of membership.
  • All health service workers who are employed by any of the following and who meet the criteria below, are entitled to scheme membership; NHS organisations, Direction Body, New Fair Deal employer, approved medical/dental contractors or medical/dental practitioners and they must:

    • be aged between 16 and 75
    • not be entitled to continue membership of the 1995/2008 Scheme
    • not be in receipt of pension benefits from the 1995 section (there are a few exceptions).
  • Contribution rates are the same for members of the 2015 Scheme and the 1995/2008 Scheme. For more information, see our pension contribution and tax arrangements web page.

  • The 2015 Scheme has the same flexibilities as the 2008 section alongside a new provision; Early Retirement Reduction Buyout (ERRBO). Taking benefits before NPA results in them being reduced for early payment. Members or employers can pay additional contributions to eliminate or lower the amount of reduction that would apply. This is restricted to a maximum of three years before the member reaches their NPA.

  • From 1 April 2015 a transfer out to a Defined Contribution (DC) pension scheme, such as a personal pension, is no longer allowed. Transfers into the 2015 Scheme will usually be treated as a monetary amount of pension credit and will be subject to in scheme revaluation.

  • Periods of membership can be linked providing there is not a break of more than five years. If there is a break of more than five years the pension earned up to the start of the break becomes deferred. At retirement, these benefits are revalued by adding a pensions increase which currently is calculated as Consumer Price Index (CPI) only which means it will be less than an in scheme revaluation (CPI + 1.5 per cent).

  • Full protection

    Members who were within 10 years of their NPA as at 1 April 2012 will remain in their current section until they retire or otherwise leave the scheme and will not automatically move to the 2015 Scheme.

    Tapered protection

    Members who were more than 10 years, but less than 13 years and 5 months from their NPA as at 1 April 2012 are entitled to tapered protection. This means they will move to the 2015 Scheme at a future date.

    No protection

    Members who, as at 1 April 2012, were more than 13 years and 5 months from their NPA had no protection and moved to the 2015 Scheme on 1 April 2015.

  • The 2015 Scheme has important implications for members with salary sacrifice arrangements and those considering them in the future. Employers need to review how staff with these arrangements are informed of the implications. They also need to update relevant policies and processes.

    In a Career Average Revalued Earnings (CARE) pension scheme, like the 2015 Scheme, pension benefits are built up on a year by year basis. Any change to a members salary in each year (such as salary sacrifice), will have an impact on the individuals gross pensionable pay. Entering into a salary sacrifice arrangement that reduces gross pensionable pay will mean that reduced benefits are built up for that period.

    Under the 1995/2008 Scheme, pension benefits are calculated on the salary on or near retirement. For members in salary sacrifice arrangements, there have been no central restrictions on members opting out of these arrangements as they approach retirement, which means pension benefits are based on pay without any salary sacrifice reduction. However, please note a large increase in a member’s pay prior to retirement may result in an employer charge under final pay control.

    As there is a significant change in how salary sacrifice arrangements impact on pension benefits between the two types of schemes, we believe it is important for employers to ensure staff are aware.

    Action for employers

    This is an important issue and we encourage employers to consider this and the impact for members. As organisational salary sacrifice schemes are delivered at a local level, it is your responsibility to ensure that employees are fully aware of the implications to their pension contributions. It is important that members are aware of any pension implications before entering into a salary sacrifice arrangement whilst a member of the 2015 Scheme.

    Your organisation is encouraged to take action to ensure that individuals are aware of the potential impact of the 2015 Scheme. You also need to consider how this message is communicated more widely through your policies and procedures and accompanying communication materials.

    As an organisation you will also have an agreed approach to total reward for your staff, this does not change that position, but does ensure your employees are fully aware of any decisions they choose to make on salary sacrifice.

  • The NHS Pension Scheme has governance arrangements in place to ensure that the scheme remains sustainable for both employers and employees across England and Wales.

    These governance arrangements are made up of two statutory boards, established in 2015 under the Public Service Pensions Act 2013. Both boards are accountable to the Secretary of State for Health and Social Care (SoS), and each has a separate function:

    • Scheme Advisory Board
      Responsible for providing advice to the SoS on the desirability of changes to the NHS Pension Scheme.
    • Pension Board
      Provides scrutiny and assurance of the administration of the NHS Pension Scheme, and helps the SoS to ensure that the scheme complies with all relevant pensions laws, regulations and directions. 

    This web page provides an overview of the Scheme Advisory Board for the NHS Penson Scheme (England and Wales). Further details about the NHS Pension Board can be found on the GOV.UK website.
     

    Responsibilities of the Scheme Advisory Board

    The statutory role of the Scheme Advisory Board (SAB) for the NHS Pension Scheme is to provide advice to the SoS on the desirability of changes to the NHS Pension Scheme for England and Wales.

    SAB has an ongoing request for advice from the Department of Health of Social Care (DHSC) in the form of an annual work plan, and can also submit advice on a proactive basis.

    As part of its role to provide advice on the desirability of changes to the scheme, SAB is responsible for:

    • Engaging with the valuation process of the NHS Pension Scheme and commenting on how it is conducted.
    • Making recommendations on adjustments to the NHS Pension Scheme if, following a valuation, costs breach the employer cost cap.
    • Responding to policy issues.
    • Commenting on proposed changes to scheme regulations.

    Membership

    SAB is a partnership board, with its members representing NHS employers and NHS trade unions.

    The current co-chairs of the board are:

    • Sue Jacques (NHS employers) – County Durham and Darlington NHS Foundation Trust
    • Nicola Lee (NHS trade unions) – Royal College of Nursing.

    SAB members include:

    • Employer representatives from across England and Wales.

    These members are nominated by NHS Employers to offer the breadth of employer representation for the NHS Pension Scheme.

    • Member representatives from the NHS trade unions.

    These members are nominated by the staff side of the NHS Staff Council to ensure a broad representation of scheme membership.

    As a partnership board, SAB aims to reach decisions by consensus between employer and staff side representatives.

    SAB members are supported in their discussions by advisors from the Government’s Actuary Department (GAD), First Actuarial (the board’s current independent actuary) and the NHS Business Services Authority (the scheme administrator).

    Representatives from the Department of Health and Social Care (England), the Welsh government and the Scottish government attend SAB meetings as observers.

    NHS Employers provides the secretariat function for SAB meetings.
     

    Technical Advisory Group (TAG)

    The Technical Advisory Group (TAG) is a sub-group of SAB. The role of TAG is to provide detailed and technical analysis on the potential impacts of proposed changes to the NHS Pension Scheme, and to make recommendations to SAB as requested. 

    TAG also operates as a partnership group, with members representing NHS employers and NHS trade unions.
     

    Annual report 2020-21

    The 2020-21 annual report highlights the work of the Scheme Advisory Board between April 2020 and March 2021. The key priorities for SAB over the year were:

    • Responding to HM Treasury’s consultation on removing age discrimination from public sector pension schemes (the McCloud remedy). Read SAB’s response to this consultation.
    • Reviewing the member contribution structure for the NHS Pension Scheme.
    • Commenting on draft directions for the re-run of the cost cap element of the 2016 valuation. 

    As well as providing further details about SAB’s work throughout the year, the annual report contains a full list of SAB and TAG members and SAB’s work plan from DHSC for 2020-21. 

    Download the report.

    Further information

    For further information about the Scheme Advisory Board, or to request a copy of annual reports from previous years, please contact pensions@nhsemployers.org

  • NHS Pensions has published a useful comparison of the features and benefits of the 1995/2008 Scheme and the 2015 NHS Pension Scheme. The comparison includes information on the age at which members can retire and differences in how the pension and lump sum are calculated at retirement. The document is available to view on the NHS Pensions website.

Watch our overview of the NHS Pension Scheme video, which explains what the NHS Pension Scheme is and gives a brief overview of the benefits payable from the NHS Pension Scheme.