Scottish NHS Pension Scheme Changes from 1 April 2008
Rules and Benefits Comparison
The new
arrangements for the NHS Pension Scheme in
i.e. the current NHS Pension Scheme updated and an NHS Pension scheme for those joining the scheme for the first time
from 1 April 2008. Active members of the current scheme will be given a choice with regard to the new scheme in early 2009.
The table below and on the following pages allows you to compare the benefits between the current NHS Pension Scheme as it
stands, the current NHS Pension Scheme incorporating changes from 1 April 2008 and the NHS Pension Scheme from 1 April 2008.
(Please note this information should be taken as guidance only and should not be taken as a definitive statement of the
NHS pension scheme regulations)
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NHS Pension Scheme (pre 1 April 2008 terms) |
NHS Pension Scheme (1 April 2008 and after terms) Effective from 1 April 2008 |
NHS Pension Scheme for those joining the scheme for the first time Effective from 1 April 2008
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Who can join these schemes? |
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§ This Scheme is an updated version of the current NHS Pension Scheme and members of that Scheme will automatically become members of this Scheme on 1 April 2008. Qualifying deferred members[1] returning to the NHS will also become members of this Scheme. The Scheme is closed to all other groups. |
§ All eligible staff from 1 April 2008
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Who do these rules and benefits apply to from 1 April 2008 |
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§ Members of the NHS Pension Scheme active on and before 1 April 2008 who do not opt to move to the new NHS Pension Scheme (choice exercise likely to be early 2009) § Deferred members at 1 October 2008 who return to the NHS within five years of leaving and do not opt to move to the new NHS Pension Scheme |
§ Staff joining the NHS Pension Scheme for the first time. § Members of the NHS Pension Scheme active on and before 1 April 2008 who opt to move to this scheme (choice exercise likely to be early 2009) § Eligible deferred members returning to the NHS who opt to move to this scheme § Deferred members who return to the NHS from 1 October 2008 and more than five years after leaving.
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Normal pension age (NPA) |
§ 60 (or 55 for special classes) |
§ 60 (or 55 for special classes) |
§ 65
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Minimum pension age ( when staff can take a pension other than ill-health) |
§ 50[2] |
§ 50 (see footnote 2) |
§ 55
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Contribution rate on all annual FTE pensionable pay |
§ 5% manual workers § 6% others |
Tiered Contribution[3] Rates
up to £19,682
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5% |
Tiered Contribution Rates
up to £19,682
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5% |
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£19,683 - £65,002
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6.5% |
£19,683 - £65,002 |
6.5% |
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£65,003- £102,499 |
7.5% |
£65,003- £102,499 |
7.5% |
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£102,500 plus
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8.5% |
£102,500 plus
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8.5% |
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Special Retirement Rights |
§ Nurses, midwives, health visitors, physiotherapists and mental health officers (MHOs) in post before 1 April 1995 (collectively described as ‘Special Class Status’ ) |
No change to Special Class Status |
No Special Class Status |
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Membership limits |
§ From age 16 to 70 § 40 years at age 60 and 45 years overall
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§ From age 16 to 75 § Overall membership for future service, of 45 years |
§ From age 16 to 75 § Overall membership limit of 45 years |
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Earnings,
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§ Some members joining from 1 June 1989 are subject to “earnings cap”[4] |
§ No earnings limit for future service |
§ no earnings limit
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Accrual rate (the way you earn your pension) |
§ 1/80th final salary scheme § Career Average Re-valued Earnings Scheme for practitioners (CARE) accrual rate of 1.4% |
§ 1/80th final salary scheme § CARE for practitioners accrual rate of 1.4% |
§ 1/60th final salary scheme § CARE for practitioners, accrual rate of 1.87%
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Retirement Lump sum
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§ Automatic fixed tax-free lump sum of 3 x pension (or 4.2% for practitioners) |
Automatic fixed tax free lump sum of 3/80ths x service x pensionable pay (or 4.2% for practitioners) plus the ability to give up part of pension[5] for an increased tax free lump sum up to 25% of pension value[6] Calculator |
Total flexibility to give up part of pension for a tax free lump sum of up to 25% of pension value or keep all as a pension[7]
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Final Salary Pension based on |
§ best of the last 3 years pensionable pay |
§ best of the last 3 years pensionable pay |
§ Annual average of best 3 consecutive years pensionable pay, in last 10 years, re-valued by Retail Price Index.
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Practitioner Pension based on |
§ All pensionable earnings revalued by dynamising factors determined by changes in the earnings of each practitioner profession |
§ All pensionable earnings revalued by dynamising factors determined by changes in the retail price index plus 1.5% |
§ All pensionable earnings revalued by dynamising factors determined by changes in the retail price index plus 1.5%
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Flexible retirement |
§ Pensionable re-employment if you retire on ill-health grounds, draw a pension and return to the NHS under age 50 § No pensionable re-employment on drawing a pension on any other grounds § Pension payable on retirement only |
§ Pensionable re-employment if you retire on ill-health grounds, draw a pension and return to the NHS under age 50 § Pension payable on retirement only[8] § Step down – voluntary pension protection where pay is reduced on taking a less demanding job.
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§ If you retire on or after 1 April 2008 and before the choice exercise pensionable re-employment is available in the New Scheme after a break of 2 years. § Pensionable re-employment on return to work after retirement and re-join the Scheme § Draw down – taking part of pension whilst continuing in a less demanding NHS employment
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Late Retirement Factors (LRFs) ( practice of applying an immediate increase to a pension because it is coming into payment later than a scheme normal pension age) |
§ no immediate increase where pension taken later than NPA 60 (or 55 for special classes) |
§ no immediate increase where pension taken later than NPA 60 (or 55 for special classes) |
§ immediate increase to pension if taken later than NPA 65
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Abatement (practice of reducing a pension if the combined amount of pension and salary in re-employment exceeds the pre retirement level of pensionable pay)
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§ Takes full pension into account § no abatement after age 60 or after 50 where pension is actuarially reduced on Voluntary Early Retirement (VER) |
§ Takes only part of pension into account[9] § no abatement after age 60 or after 50 where pension is actuarially reduced on Voluntary Early Retirement (VER) |
§ Takes only part of pension into account § no abatement after age 60 or after 50 where pension is actuarially reduced on Voluntary Early Retirement (VER)
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Voluntary Early Retirement with actuarial reduction |
§ From age 50 (see foot note 2) |
§ From age 50 (see foot note 2) |
§ From age 55
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Ill health retirement |
§ Ill health retirement benefits up to 10 years extra service |
§ Separate Review – proposals to be confirmed
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§ Separate Review – proposals to be confirmed
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Opportunities to save for increased pensions |
§ Purchase of Added Years § Money Purchase Added Voluntary Contributions (MPAVCs) Stakeholder partner ( currently Standard Life) § Half cost Added Years for eligible members who took a refund of pension contributions before 6 April 1978 |
§ Members (or employers on their behalf) can buy additional annual pension of up to £5,000 a year § Existing added years contracts honoured but no new contracts. § Retain current MPAVC provider
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§ Members (or employers on their behalf) can buy additional annual pension of up to £5,000 a year § Retain current MPAVC provider
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Contribution limits |
§ 15% max employee contributions |
§ Employee contribution limited to 100% of pensionable pay[10] |
§ Employee contribution limited to 100% of pensionable pay (see footnote 11) § |
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Survivor Benefits |
§ For legal spouse and registered civil partnerships from 2005 (backdated until 1988) § Partners lose benefits on re-marriage |
§ All qualifying partners eligible for pension backdated to 1988[11] § All qualifying partners keep survivor pension even when re-marry or co-habit |
§ All qualifying partners eligible for pension § All qualifying partners keep survivor pension even when re-marry or co-habit |
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Death in Service |
§ Death in service lump sum twice annual pensionable pay
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§ Death in service lump sum twice annual pensionable pay
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§ Death in service lump sum twice annual pensionable pay
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Child Allowances |
§ Payable under the age of 17 and from 17 if still in full time education (beyond 23 if physically or mentally dependant) |
§ Payable to dependent children up to age 23 in all cases[12] |
§ Payable to dependent children up to age 23 in all cases |
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Survivor pensions on death in service |
§ Initial widow/widower/civil partners(s) pension paid for 3 months or 6 months subject to dependent children |
§ Initial Partner Pension to be paid for 6 months in all cases |
§ Initial Partner Pension to be paid for 6 months in all cases |
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For more details see the text of the agreement on the pension reform at www.sppa.gov.uk
You can also contact your pension administrator on 01896 893100 or e-mail nhspensionsreform@scotland.gsi.gov.uk
[1] Qualifying deferred members are those who:
· Return to the NHS before 30 September 2008 or
· Return on or after 1 October 2008 after a break in their NHS employment of less than 5 years.
[2] The Finance Act 2004 allows schemes to provide protection of a minimum pension age of 50 for members who had a right to take reduced benefits at that age on 5 April 2006. If
afforded, this protection may continue as long as members retiring early after 6 April 2010 take all their benefits payable under scheme rules. In the NHS` Scheme, for those
without protection, members who first joined and some who returned to the Scheme after 6 April 2006, minimum pension age will change from 50 to 55 from 6 April 2010.
[3] In 2008/09 your contribution rate will be based on pensionable pay in 2007/08. From April 2009, your rate will be calculated on your actual pensionable pay every month (every year for GPs and dental practitioners). Pay thresholds (e.g. £19,682) will be adjusted in line with Agenda for Change pay awards. The thresholds in this table are based on 2007/2008 pay rates. Interim arrangements will maintain 5% for manuals for one year only (2008/09).
[4] Dental practitioners have a separate additional Maximum Allowable Remuneration – MAR, which can affect high earners not subject to the normal earnings cap. Dental earning cap from 1 April 2007 £115,800.
[5] Giving up part of pension for a lump sum is described as ‘commutation’, you exchange at a rate of £12 of lump sum for each £1 pa of pension given up
[6] Pension value is determined by a formula and is approximately 20 times the annual pension plus any lump sum taken. This means in practice that the maximum lump sum that may be taken can be calculated by multiplying the standard 1/80th pension by 5.36, and the potential extra lump sum is the difference between this figure and the standard 3/80th provided.
[7] This means in practice that the maximum lump sum may be taken can be calculated by multiplying the pre-commutation pension by 4.28
[8] Deferred members who return to the NHS after 5 years will be able to draw their deferred pension at 60 while continuing in pensionable employment in the New Scheme
[9] Only takes into account any additional pension over and above what would have been paid had benefits been actuarially reduced in the same way as for voluntary early retirement
[10] No limits to pensionable pay or service. However in line with the Finance Act 2004 upper limits will apply for tax privileged pension savings of £215,000 (annual increase in pension value) and overall limit of £1.5m pension accrual as at April 2006.
[11] All service from 1972 for legal female spouses. Partners defined as someone who you are married to, have entered into a Civil Partnership with, or with whom you have an exclusive and long - term committed relationship in which you are financially dependent or inter - dependent.
[12]This allowance will be payable indefinitely as long as the child, through physical or mental impairment remains unable to earn a living and the condition existed at the member date of death.