22 Mar 2024

NHS pension schemes explained

All you need to know about the NHS Pension Scheme - how much you pay in, how the Scheme works, and what you can expect to get back.

Paul Davies

In this article

What is the NHS pension scheme?
NHS pensions: which scheme applies to me?
How much do I contribute to my NHS pension?
When can I collect my NHS pension?
How much will a NHS pension pay in retirement?
What happens if I have a break in service?
What happens to my NHS pension when I die?
NHS pensions and the annual allowance

What is the NHS pension scheme?

The NHS Pension Scheme is an attractive benefit for those that work extremely hard in the challenging environment of the country's health service.

On 1 April 2015, some significant changes to the pension schemes offered by the NHS were introduced. The kind of deal you get when you retire will depend on when you joined the scheme.

Which? explains what you need to know about the NHS Pension Scheme - from how it works, the different schemes operating, how much you pay in - and how much you can expect to get back.

NHS pensions: which scheme applies to me?

There are three different 'sections' of NHS Pension Scheme - the 1995 Section, the 2008 Section and the 2015 Section.

The 1995 and 2008 Sections of the NHS Pension Scheme pay a final salary pension. The 2015 Section pays an income based on your career average earnings, which is less generous than the final salary scheme.

Some people who were members of the original 1995 or 2008 sections of the NHS pension scheme were moved into the 2015 Section on 1 April 2015.

But others qualify for 'protection' because the age at which they could claim their pension was close when the changes were introduced.

If you've been saving into either the 1995 or 2008 Sections of the NHS Pension Scheme, you could benefit from 'full protection'. This means that you'll stay in the more generous final salary scheme.

You qualify for full protection if, on 1 April 2012, you were:

over your normal pension age;
or 10 years or less from your normal pension age;
and in active membership of the scheme between 31 March 2012 and 31 March 2015.

If you've been saving into either the 1995 or 2008 Sections of the NHS Pension Scheme, you could benefit from 'tapered protection'. You'll still move into the less generous career average scheme, but on a date after 1 April 2015.

You qualify for tapered protection if, on 1 April 2012, you were:

between 10 years and 13 years and 5 months away from your normal protection age;
and in active membership of the scheme between 31 March 2012 and 31 March 2015.

This means you'll stay in the final salary arrangement for longer. You can work out when you'll move into the career average scheme using this NHS' Tapered Protection calculator.

How much do I contribute to my NHS pension?

Contributions rates into your NHS pension were fixed for the period April 2015 to 2021 and applied to both the 2015 and 1995/2008 schemes.

Both full-time and part-time workers pay a percentage of their gross salary into their pension each month. This is topped up by employer contributions and you'll receive pension tax relief on your contributions.

Contributions are based on your previous years' pensionable earnings and are shown below as a percentage of gross salary (before tax relief). The rates for 2024-25 are shown below.

The employer's contribution rate changed from 14.38% to 20.68% on 1 April 2019, which includes a scheme administration charge of 0.08%.

Salary range	Contribution rate
Up to £13,259	5.2%
£13,360-£26,831	6.5%
£26,832-£32,691	8.3%
£32,692-£49,078	9.8%
£49,079-£62,924	10.7%
£62,925 and above	12.5%

When can I collect my NHS pension?

You get your pension at what is called the 'normal pension age'. This is the age that you retire from working for the NHS and have your pension paid without facing a reduction for early payment.

You can retire early and claim you pension once you reach the minimum pension age (55). However, if you do this your pension benefits will be reduced, to reflect the fact that your pension will pay out for longer.

Your normal retirement age varies depending on what section of the scheme you're in.

1995 Section - normal retirement age is 60
2008 Section - normal retirement age is 65
2015 Section - normal retirement age is your state pension age.

If you've built up benefits in more than one section of the scheme, you can take them when you reach your normal pension age - without having them reduced.

So, if you were part of the 1995 Section, for example, you could claim your pension at 60 and carry on working. However, you cannot undertake NHS work for more than 16 hours a week in one month after you collect your pension.

How much will a NHS pension pay in retirement?

The amount of income you'll be paid from your NHS pension depends on the scheme you're in. If you're in both the 1995/2008 final salary scheme and the 2015 career average scheme, you'll get a combination of the two.

The 2015 NHS pension is a 'career average revalued earnings' scheme, which is a type of defined benefit pension.

Your final pension is based on pensionable pay throughout your career. Each year, two calculations are applied to a proportion of your annual income is

Build-up rate

The amount of pension you earn each year is worked out via the 'build-up rate', which is a fraction of your pensionable earnings. The build-up rate in this scheme is 1/54th, so you earn a pension each year of 1/54th of your pensionable earnings.

Revaluation

Your pension earned each year will also be increased each year by a rate, known as 'revaluation', in the period before you retire or leave.

The revaluation rate is determined by Treasury Orders plus 1.5% each year. Treasury Orders are the method by which the Treasury notifies the value of the change in prices or earnings to be applied as part of revaluation.

Calculating your 2015 NHS pension: an example

Josh earned £18,000 in year 1, so his pension would be 1/54th of £18,000 which is £333.

This is then revalued using the agreed formula - say increasing by 3.5%, to give a pension of £345 at the beginning of year 2.

With the 1995 scheme, your pension is 1/80th of the best of the last three years' pensionable pay for each year of membership in the scheme.

The pension is calculated as follows: Pensionable pay x pensionable membership in days x (1/80 x 1/365) = pension.

Calculating your 1995 NHS pension: an example

Jean was in the 1995 NHS pension scheme for 15 years (or 5,475 days).

The best of her pensionable pay in her last three years of work was £33,000.

Her pension is calculated as £33,000 x 5,475 days x (1/80 x 1/365) = £6,187.50 per year.

The 2008 pension is based on your 'reckonable' pay. Your reckonable pay is the average of the best three consecutive years' pensionable pay in the last 10 of year career in the NHS.

Your pension is 1/60th of your reckonable pay for each year of membership in the scheme.

The pension is calculated as follows: Reckonable pay x pensionable membership in days x (1/60 x 1/365) = pension.

Calculating your 2008 NHS pension: an example

Jack has been part of the 2008 pension for eight years (2,920 days) when he decided to retire. His average pensionable pay was £75,000.

His pension is calculated as £75,000 x 2,920 days x (1/60 x 1/365) = £10,000 per year.

What happens if I have a break in service?

If you leave NHS employment and then return, what scheme you subsequently come under will depend on the length of the break and the level of protection you have.

Leaving and rejoining the 1995/2008 scheme

If you rejoin the NHS after 1 April 2015 after a break of less than five years and qualify for either full protection or tapered protection, you will rejoin the same section of the 1995/2008 Scheme.

If you have tapered protection, you'll either stay in the 1995/2008 Scheme until your transition date to move to the 2015 Scheme (a date determined by your age in years and months as at 1 April 2012) or move straight into the 2015 Scheme.

If you are not entitled to any protection, or move following the end of tapered protection, you'll go back into the 2015 Scheme and your benefits already built up in the 1995/2008 Scheme will be retained and calculated using a final salary pay rate.

If you return to the NHS after a break of more than five years then you'll join the 2015 scheme, and your 1995/2008 and 2015 benefits will be separate.

Leaving and rejoining the 2015 scheme

If you rejoin the NHS after a break of less than five years, you will benefit from having your old benefits linked to the new ones you build up, so that your total benefits enjoy more generous annual increases to cover inflation. This is known as 'revaluation'.

If you come back after five years, your pensions don't get linked. Your new benefits will be instead increased by a government-set measure, currently the Consumer Prices Index. In 2019, that was 2.4%.

What happens to my NHS pension when I die?

This scheme also looks after your family if something should happen to you. The NHS Pension Scheme provides lump sum and pension benefits in the event of your death, which are detailed below:

Lump sum on death

You can nominate that your spouse, registered civil partner or qualifying nominated partner receive a lump sum when you die. The lump sum will be around 2 x annual earnings.

Adult dependent's pension

An adult dependent's pension is payable for life to an eligible spouse, civil partner or nominated qualifying partner. The benefit is worth around 34% of the full pension.

Children's pension

Children's pensions are payable for an eligible child or children under the age of 23. The benefit is worth around 17% of the full pension.

NHS pensions and the annual allowance

NHS pensions were in the news with calls for changes to the pension annual allowance in relation to medical staff.

The annual allowance, which is £60,000 in 2023-24 and 2024-25 (up from £40,000 in 2022-23), is the cap on the amount you can save every year into your pension and earn Tax relief on pension contributions explained

Once you were earning more than £150,000, your annual allowance fell in line with the so-called 'tapered annual allowance'. This was designed to reduce the amount of tax relief higher earners can get on pension contributions.

If your income was between £150,000 and £210,000, you lost £1 of annual allowance (starting at £40,000) for every £2 of adjusted income. So once your income reached £210,000, you were left with an annual allowance of £10,000.

If you exceed your annual allowance, you get hit with a tax charge. We've explained this in detail in our guide to how the pensions annual allowance works.

Why was this a problem for NHS pensions?

Doctors and consultants were being hit with tax rates of up to 100% or higher. Tax charges could start if you earn more than £110,000 because of the way pension rights are calculated.

The upshot could be an unexpected tax bill to be paid upfront to protect a pension paid out years later.

This was leading to doctors cutting back on hours or retiring because they could not afford the tax bills that came with the additional income they earned. This was having a knock-on effect on hospital waiting times.

What changed with the annual allowance taper?

However, in the 2020 Budget the Chancellor increased the tapered annual allowance thresholds by £90,000. This applied to all high earners but particularly helped to ease the pressure on some NHS workers (eg doctors and surgeons) who'd received large tax bills as a result of their earnings.

In April 2023, both the threshold and adjusted incomes rose by £20,000 to £220,000 and £260,000 respectively. For those with total income over £260,000, the annual allowance gradually falls from £60,000 to £10,000 meaning that it will be £10,000 only for anybody earning in excess of £360,000.

Is there anything else happening to NHS pensions?

There is further uncertainty around NHS pensions following a legal ruling in June 2019 that found age discrimination in public sector pension schemes for firefighters means that different treatment based on age will need to be 'remedied' for NHS scheme members as well.

The court case considered the potentially discriminatory impact of the pension changes that were introduced in 2015.

These changes saw public sector workers who were aged under 50 on 1 April 2015 denied benefits offered to those closer to retirement age. It is unclear so far how the discrepancies will now be reconciled.