A new NHS Pension Scheme will be coming in effect from 1 April, 2015. This means the existing 1995/2008 Scheme will now be closed to new entrants from 1 April, 2015. All these new entrants without previous service and the members of 1995/2008 scheme without full protection will need to join this new scheme.
Some of the main features of this NHS Scheme are:
Overview for employers
Career Average Revalued Earnings (CARE) scheme
• A benefit scheme which pays a pension based on the average of your pensionable earnings each year throughout your career
• Revaluation of active members benefits in line with Consumer Price Index including 1.5 per cent per annum
• A normal Pension Age (NPA) at which benefits can be claimed without reducing early payment related to the same age as you is entitled to claim your state pension
• A build up rate of 1/154th of each year’s pensionable earnings with no limit on the number of years can be considered
• A final pension is calculated by adding revalued pension earned in each year of membership.
Scheme Membership
All health service workers employed by NHS organisations, Direction Body, New Fair Deal employer, approved medical/dental contractors or medical/dental practitioners are entitled to scheme membership only if they meet certain criteria. The criteria include workers aged between 16 and 75, not allowed for carrying on 1995/2008 Scheme and not having pension benefits from 1995/2008.
Contribution Rates
The member contribution rates will be similar to the current 2014/15 scheme and will continue to remain so from 1 April, 2015 to 31 March, 2015. If you are a member of both 1995/2008 Scheme and 2015 Scheme, these rates need to be paid. However, a small adjustment to the tier 4/5 boundary is an exception.
Flexibilities
The 2015 Scheme will have a new provision; Early Retirement Reduction Buyout (ERRBO). This means as members or employers, you can pay additional contributions for reducing the amount that would apply but has a restriction up to three years before the member reaches their NPA.
In and out transfers
While a transfer out to a Defined Contribution pension scheme will not be allowed, transfers into the 2015 Scheme will be subjected to scheme revaluation.
Breaks
If there is a break of over five years, the earned pension from the start of the break becomes delayed. These benefits are revalued by adding increased pension amount which is currently calculated as Consumer Price Index (CPI) only but at retirements.
Protection for 1995/2008 Scheme members
If you were within 10 years from your NPA on 1 April, 2012, a full protection will be there for you. However, you will not move to the 2015 Scheme.
Tapered protection is available if you were more than 10 years, but less than 13 years and 5 months from your NPA on 1 April, 2012. This will help you move automatically to the 2015 Scheme at a date later than 1 April 2015.
In case, if you were more than 13 years and 5 months from your NPA as at 1 April 2012, there will be no protection for you and will move to the 2015 Scheme on 1 April 2015 itself.
Salary Sacrifice Arrangements
As an employer, you need to review how staff with these arrangements will be informed and be updated with these implications. It is because the 2015 Scheme has important implication for members with salary sacrifice arrangements.
These are the changes in the NHS Pension Scheme in 2015 which will be accountable for the employers.
If you want to discuss about the NHS pension scheme, our medical accountant is here to help you.
