Proposed final agreement


The 2015 Scheme is based on principles contained within the proposed final agreement (PFA). A full copy of the PFA is available on the Department of Health (DH) website

Key highlights for employers:

The main parameters of the 2015 Scheme

  • a pension scheme design based on Career Average Revalued Earnings (CARE)

  • an accrual rate of 1/54th of pensionable earnings each year with no limit to pensionable service

  • revaluation of active members benefits in line with Consumer Price Index (CPI) plus 1.5 per cent per annum

  • a normal pension age (NPA) equal to the state pension age, which applies both to active members and deferred members (new scheme service only)

  • those within ten years of current NPA are excluded and accrued rights in the 1995/2008 Scheme will also be related to current NPA

  • pensions in payment to increase in line with inflation (currently CPI)

  • benefits in any period of deferment to increase in line with inflation (currently CPI)

  • member contributions on a tiered basis to produce a total yield of 9.8 per cent of total pensionable pay in the scheme

  • optional lump sum commutation at a rate of £12 of lump sum for every £1 per annum of pension foregone up to the maximum limit on lump sums permitted by HM Revenue and Customs

  • draw down of pension on partial retirement 

  • ability to retire and return to the pension scheme

  • ill-health retirement pensions to be based on the current ill-health retirement arrangements but with enhancement for higher tier awards to be at the rate of 50 per cent of prospective service to NPA

  • spouse and partner pensions to continue to be based on an accrual rate of 1/160th. For deaths in retirement, spouse and partner pensions will remain based on pre-commuted pension

  • the current arrangements for abatement (for service accrued prior to and post 2015) will be retained

  • lump-sum on death in service will remain at two times actual pensionable pay

  • for members who in the new scheme have a normal pension age higher than 65 there will be an option in the new scheme to pay additional contributions to reduce or, in some cases, remove any early retirement reduction that would apply if they retire before their NPA. Only reductions that would apply in respect of years after age 65 can be bought out and the maximum reduction that can be bought out is for 3 years (that would apply to a member with a NPA of 68 or higher)

  • added years contracts in the 1995 section will continue on transfer to the 2015 Scheme

  • additional pension arrangements will continue

  • the Public Sector Transfer Club will continue and further consideration will be given to the best way of operating it in the reformed schemes.

Transitional protection for existing members

  • All accrued rights are protected and those past benefits will be linked to final salary when members leave the scheme. Existing arrangements with respect to the Uniform Accrual Formula for mental health officers will continue to apply for staff who move to the new arrangements.
  • The current rules requiring staff in the 1995 section to retire, take all benefits and be prohibited from further pension scheme membership will be retained but with the following changes. Staff on taking their 1995 benefits after the age of 55, will be able to defer their 2015 benefits but without the possibility of further accrual in the NHS Pension Scheme.
  • All active NHS Pension Scheme members in the 1995 arrangements with a current NPA of 60 or 55 who, as of 1 April 2012, have 10 years or less to their current NPA or are over their current NPA will have their future benefits protected. This will be achieved by their remaining in the 1995 section on their current benefit terms until they retire.
  • Members in the 1995 section who are within a further 3 years and 5 months of their current normal pension age, (i.e. up to 13 years and 5 months from their NPA) will have limited protection with linear tapering so that for every month of age that they are beyond 10 years of their current NPA, they lose 2 months of protection. At the end of the protected period, they will be transferred into the new pension arrangements.
  • All active NHS Pension Scheme members in the 2008 arrangements who as of 1 April 2012 have 10 years or less to their current NPA of 65, or are over 65 will be given protection by their being allowed to remain in their current arrangements until they retire. A tapered arrangement (on the same basis as above) will apply those within a further 3 years and 5 months of their current NPA age as of 1 April 2012.
  • Members with protection who leave active service and return within five years will be able to return to their current arrangements with final salary linking if they are in the fully protected group. If they are in the tapered protection group, they will return to the scheme arrangements that they would have been in had they remained in service, again retaining final salary linking. Members not covered by protection will be able to re-link their accrued rights to final salary on retirement if they return within five years. Those who return after more than 5 years will, as now, be offered the choice of converting their past service to the current scheme terms on a Cash Equivalent Transfer Value (CETV) basis or leaving it as an accrued benefit without final salary linkage.

Reviewing member contributions and scheme opt out rates

The Government remains committed to securing in full the spending review savings of £2.8bn by 2015 from increased members contributions, and will consult formally on the implementation for the years 2013-14 and 2014-15 before the 2015 Scheme is introduced.

Future increases to state pension age

The Government’s view is that in the 2015 Scheme, for pension accruals post 2015, NPA should be set equal to state pensions age.  This will mean that each scheme member will have an individual NPA dependent on their date of birth.

As a result, the Working Longer Group (WLG) has been established to review the implications of the NHS workforce working to a later, raised retirement age.

Employer cost cap

A cap on employer contributions will be introduced to cover unforeseen events and trends that significantly increase scheme costs. The employer cost cap is intended to provide backstop protection to the taxpayer and will be based on already agreed cap and share principles which underpinned the changes introduced in 2008.

25 year guarantee

The Chief Secretary to the Treasury intends to protect the scheme from further reform for a period of 25 years, outside of the processes agreed for the cost cap noted above.

To read more about the 2015 Scheme please see our webpage.

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