NHS Pension Scheme – An Introduction

NHS-Pension-AgencyAs a member of the NHS Pension Scheme you get an excellent package of pension benefits, which are guaranteed by the Government to be provided to you when you become entitled to them.

Membership of the NHS Pension Scheme is voluntary. When you start working for the NHS you will automatically become a member (excluding freelance locum medical practitioners). You can decide not to join and you are free to leave the Scheme at any time. If you choose to leave you can usually rejoin at any time provided you are not absent from duty for any reason.

What does the current scheme provide?

•    A retirement pension based on 1/60th  of your reckonable pay* for each year and proportionally for any part year of scheme membership

•    An option to take a lump sum, normally tax free

•    Life assurance of 2 years’ reckonable pay while you are working

•    If you die pensions are provided for your spouse or partner. Allowances are also payable for dependent children

•    Benefits if you have to leave work because of permanent ill-health after 2 years membership

•    Options to increase your benefits by paying additional contributions

•    “Inflation proofed” by linking pensions in payment to the Consumer Price Index (CPI)**

* Reckonable pay is the average of the best 3 consecutive years’ pensionable pay in the last 10 prior to benefits being taken. Where less than 1 years pay is available, the pay will be increased pro rata to a full year. If more than 1 year but less than 3, the averaging will be over the actual period of pay available.

** “Inflation” is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. In the UK there are two main indices, the Consumer Prices Index (CPI) and the Retail Prices Index (RPI). These are, in effect, two baskets comprising different goods and services, and different methods are used to calculate them. There are many differences, but the biggest is that RPI includes housing costs such as mortgage interest payments and council tax, whereas CPI does not. The CPI typically runs at a lower rate, due to the way in which it is calculated.