Some practice nurses face retiring on a smaller income than they expected because they were unknowingly excluded from the NHS Pension, or haven't built up as much pension as they hoped. The benefits of the NHS Pension have been downgraded twice since 2008 and practice nurses employed by GP surgeries didn't even qualify for it until 1997. The impact of those losses can go unrealised until it's too late to adequately remedy the shortfall.
Are you affected?
You were excluded from the NHS Pension if employed as a practice nurse before September 1997. The effect upon your retirement prospects depends on how many years you missed out on the NHS scheme, and the value of any contributions you managed to build in an alternative workplace pension, if your employer provided one. Sadly alternative schemes are unlikely to match the NHS Pension. All practice nurses should have been enrolled in the NHS Pension since September 1997. However, some report that they were not informed about their eligibility until years later, and some may have opted out.
Practice nurses employed before September 1997 were excluded from the NHS Pension because they were employed by GP surgeries rather than directly by the NHS. The omission was eventually corrected but those affected received no redress for the lost years and the government declined to review the situation as recently as 2019. The later NHS Pension downgrades were part of sweeping changes to public sector pensions that pushed up retirement ages and typically required larger contributions from workers while watering down benefits.
While the NHS Pension is still generous in comparison to private sector alternatives, it's a good idea to check that it's on track to meet your needs in retirement. You have options if your pension is falling short, but it's better to act sooner rather than later. There isn't a one-size-fits-all solution because much depends on your personal situation. Thankfully useful information is available, so this piece will focus on outlining your options and on practical sources of guidance.
Step one: estimate the current value of your NHS Pension
First, track down your pension statement. Your statement should provide a clear estimate of your expected annual NHS Pension income in today's money. Your total income will be the sum of up to three versions of the NHS Pension. The three versions are:
The 1995 section
- Normal retirement age: 60
- Applies if you were a NHS Pension member before 1 April 2008
The 2008 section
- Normal retirement age: 65
- Applies if you were a NHS Pension member from 1 April 2008 to 31 March 2015
The 2015 section
- Normal retirement age: Your State Pension age
- Applies if you were a NHS Pension member after 31 March 2015.
You can find out more about each version of the scheme here: https://www.nhsbsa.nhs.uk/member-hub/membership-nhs-pension-scheme
The 1995 section is the most generous version and the 2015 section is the least, but all are very good pensions. You can claim your pension when you reach the minimum pension age (currently 55 but due to rise to 10 years before your State Pension age from 2028). Your benefits are usually reduced if you retire before your normal pension age.
Think of your pension statement as a forecast rather than a guarantee. For example, your benefits will likely decrease if you leave NHS employment before your normal pension age—whether due to a career break, redundancy, ill-health or any other reason. The level of your pay also affects your benefits, so review changes to your pension statement annually. Make sure that it shows your correct pay, length of service and contracted hours. Your employer should notify you when your new annual statement is available.
Your statement is provided by your pension administrator, which depends on where you work in the UK. The NHS Pension Scheme in England and Wales is administered by the NHS Business Services Authority: https://www.nhsbsa.nhs.uk/member-hub
The Scottish Public Pensions Agency (SPPA) administers pensions for NHS Scotland: https://pensions.gov.scot/nhs
HSC Pension Schemes in Northern Ireland are administered by The HSC Business Services Organisation: http://www.hscpensions.hscni.net/
The pension statement for practice nurses is usually known as an Annual Benefit Statement (ABS). Members of the England and Wales scheme can view their ABS online by clicking the button marked ‘Log in to TRS using GOV.UK Verify’ on this online portal page: https://www.nhsbsa.nhs.uk/employee-section
Some staff may get a Total Reward Statement (TRS), if your organisation uses the Electronic Staff Record System (ESR). Spreadsheet pension calculators are available for NHS Scotland members, but they rely upon you inputting the required information: https://pensions.gov.scot/nhs/your-membership/calculators
HSC pensions also provide calculators: http://www.hscpensions.hscni.net/quick-links/calculators/
Step two: add your State Pension
Don't forget to include your State Pension when assessing your retirement income. The full State Pension is worth £8 762 per year in 2019−2020. The actual value of your State Pension depends on your employment history. Sign up for a State Pension forecast to see how you're doing: https://www.gov.uk/check-state-pension
Maximising your State Pension depends on notching a full contributions record. Your forecast will reveal any shortfall, which you may be able to plug by boosting your State Pension: https://www.gov.uk/voluntary-national-insurance-contributions
The State Pension age depends upon when you were born. It rises to 66 from October 2020 and is scheduled to increase to 67 between 2026−2028. It's due to go up again for anyone born after 6 April 1970. The government regularly moves the goalposts so keep an eye on your State Pension age here: www.gov.uk/calculate-state-pension
Step three: add your workplace pension
GP employers may have offered alternatives to the NHS Pension for their practice nurses before September 1997. If you don't have any paperwork then ask your employers for details of workplace pensions available during that period.
Each employer may have offered a different scheme although you had to opt in to contribute. If your old payslips show pension contributions then you'll know that you were paying into a scheme at the time. These non-NHS Pension schemes are variously known as ‘workplace’, ‘occupational’, ‘works’, ‘company’, or ‘work-based’ pensions. The government-sponsored Pension Wise website explains these pension types in detail: https://www.pensionwise.gov.uk/en
To track down a lost pension, use the Pension Tracing Service: https://www.gov.uk/find-pension-contact-details
Once you've unearthed your paperwork, ask the scheme for a pension statement. This reveals the current value of your workplace pension(s) and should offer an estimate of the income you may eventually receive. Estimates fluctuate over time. That's because workplace pension contributions are typically invested in the stock market and other assets. Your eventual income is linked to the unpredictable future performance of these financial markets. Add in any pensions you have from other employers, plus stakeholder pensions or personal pensions, if you have them. All these pensions can be accessed from your minimum pension age.
Step four: increase your pension income
If your predicted income looks inadequate then you can top it up. The NHS scheme offers two choices:
- Buy Additional Pension (AP)
- Make Additional Voluntary Contributions (AVCs)
Both options require you to pay more of your wages into your pension now in exchange for more pension income at retirement age. You can't recover your extra contributions before you retire and the right choice depends on your individual circumstances.
Members of the England and Wales scheme can read more here: https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension
The NHS Scotland options are outlined here: https://pensions.gov.scot/nhs/your-membership/your-contributions/increasing-your-pension
For HSC pension increase details: http://www.hscpensions.hscni.net/tell-me-about/being-a-member/increasing-your-benefits/
The options are similar in each region but the following section uses the England and Wales specifics to explain the differences between AP and AVCs.
Additional Pension (AP)
This option lets you buy additional annual income from the NHS Pension scheme. You can upgrade your income in chunks of £250 up to a total income increase of £6 500 if you're a member of the 2015 section, or £5 000 if you're in the 1995 or 2008 sections. For example, if you want to buy another £1 000 of pension income when you retire from the 2015 scheme then that would currently cost:
- £93.60 in extra monthly payments into the scheme
- For the next 15 years
- If you're born on 1 January 1971
The payments vary according to your age, whether you pay by lump sum or installments, and increase if you want to cover your dependents too.
This Additional Pension calculator allows you to calculate your extra payments for the England and Wales scheme: http://www.nhspensions.nhsbsa.nhs.uk/PensionCalculators/AdditionalPension/index.aspx
The good news is that payments from your NHS earnings will usually attract tax relief which lessens the impact upon your take-home pay.
Your extra pension income is increased for inflation but reduced by early retirement. You can read more about the Additional Pension rules here: https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/additional-pension
Additional Voluntary Contributions (AVCs)
AVCs allow you to sacrifice salary to create a larger pot of pension money that you can dip into when you retire. AVCs don't go into your main NHS Pension scheme but are invested into a separate workplace pension that's run by a private sector financial company (choose between Standard Life or Prudential). Workplace pension incomes are less certain than the NHS Pension but can be accessed more flexibly. These schemes are commonly known as defined contribution pensions and the Pension Wise link in Step three leads to a detailed explanation of that type. By contrast, the NHS Pension is government-backed and a defined benefit scheme—a type that's widely regarded as the gold-standard for pensions.
The main advantage of a workplace pension is that you can access it from your minimum pension age onwards, to supplement or replace your income, without reducing the benefits of your NHS Pension by claiming it before normal retirement age. The disadvantage of a workplace pension is that your retirement income is not guaranteed because it depends on the performance of unpredictable financial markets. There is a risk that you may not be better off at all. To help you understand the nature of this risk, most people considering a defined contribution pension will benefit from independent financial advice. See the Useful Advice section.
You can pay AVCs into a choice of three workplace pensions:
- Prudential's NHS Additional Voluntary Contributions Scheme: https://www.pru.co.uk/rz/nhs/
- Standard Life's NHS Group Additional Voluntary Contributions (AVC) Plan
- Standard Life's Group Stakeholder Pension Plan
The Standard Life options are more fully explained here: https://www.standardlifepensions.com/nhs
All three options are broadly similar and most people will benefit from tax relief on their AVCs. The primary advantage of the Stakeholder Pension is that it restricts your choices to a few simple investment options, which is useful if you're not confident in this area. You can use both the AP and AVC methods to top up your pension income.
There's also a third pension-boosting option called the Early Retirement Reduction Buy Out (ERRBO): https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/early-retirement-reduction-buy-out-errbo
ERRBO doesn't allow you to increase your pension income but does enable you to claim your 2015 Section NHS Pension early without loss of benefits.
Step five: useful advice
If you have a defined contribution pension then you are entitled to a free appointment with a specialist from Pension Wise: https://www.pensionwise.gov.uk/en/appointments?ici=top-financial-advice&icn=book-appointment
They can't help you with your defined benefit NHS Pension, but can guide you through your defined contribution options. Pension Wise and the England and Wales NHS Pension website offer more tips on finding a financial advisor:
- https://www.pensionwise.gov.uk/en/financial-advice
- https://www.nhsbsa.nhs.uk/member-hub/useful-information
Always ask a financial advisor if they are ‘independent’ or ‘restricted’. Only use them if they say they're independent. Make sure you understand how much they charge. Royal College of Nursing (RCN), Unison and Unite members are all entitled to a complimentary financial review with Lighthouse Financial Advice:
- https://www.rcn.org.uk/get-help/rcn-advice/pensions-and-retirement
- https://benefits.unison.org.uk/unison-living/money/lighthouse-financial-advice/
- https://unitetheunion.org/why-join/member-offers-and-benefits/unite-financial-advice/
You can see Lighthouse's profile at the financial advisor matching service, unbiased.co.uk https://www.unbiased.co.uk/profile/financial-adviser/lighthouse-financial-initiatives-ltd-503608?hash=15720655
Think twice if you are advised to transfer your NHS Pension into a defined contribution scheme. This is only worth doing in exceptional circumstances because the NHS Pension is extremely valuable in comparison to other pension types. Unscrupulous advisors have been known to recommend transfers because they earn commission on the deal. Do not commit to a transfer without understanding why you need it, and how it benefits your advisor. Seek a second and even a third opinion if you ever find yourself in this situation. Pensions – including the State Pension – are subject to standard income tax rates above your personal allowance and any tax-free lump sum you're entitled to. Pension Credit is available to those struggling on very low retirement incomes.
To find out more about pensions, Pension Credit, tax and personal finance go to the excellent government-funded Money Advice Service: https://www.moneyadviceservice.org.uk/en
Key Points
- Include your State Pension when assessing your retirement income
- The level of your pay affects your benefits, so review changes to your pension statement annually
- Some staff may get a Total Reward Statement (TRS), if your organisation uses the Electronic Staff Record System (ESR)