Most staff in the National Health Service (NHS) contribute towards the NHS Pension. **From 1st April 2024 NHS Pension contribution percentages will change**. They will start at 5.2% and increase to 12.5%. Lower bands will contribute the least whilst higher bands will pay the most. Irrespective of pension contributions paid out of an NHS salary, the NHS 2015 Pension pot only increases by 1/54th of what is earned in the year.

Contracting out of pension payments is done via the pensions department. The age someone can retire (without reduction) is dependent on their State Pension Age. State Pension age varies according to the year a person was born.

NHS Pension contributions are taken before Tax and National Insurance calculated and deducted. The following table shows the new pension contribution rates from 1st April 2024. Some members will pay more, some will pay less!

Earnings from | Earnings to | 1st Oct 2022 | 1st April 2024 *NEW* |
---|---|---|---|

£000 | £13,259.99 | 5.1 to 5.7% | 5.2% |

£13,260 | £26,831.99 | 5.7 to 7.7% | 6.5% |

£26,832 | £32,691.99 | 7.7 to 9.8% | 8.3% |

£32,692 | £49,078.99 | 9.8 to 10% | 9.8% |

£49,079 | £62,924.99 | 10 to 12.5% | 10.7% |

£62,925 | £Infinity | 12.5 to 13.5% | 12.5% |

Staff in the lower bands will pay slightly more pension. For example, someone who earns £13k a year will now pay an extra 0.1% towards their pension. This will result a slight increase in tax relief. Anyone earning over £62,924.99 (top Band 8B, 8C etc) used to pay 13.5% pension contribution will now pay 12.5%. This is 1% less than previously.

There are three types of NHS Pension. The 1995, 2008 and 2015. New starters (from 2015) will be on the 2015 NHS Pension. Longer serving NHS staff will have a combination of the three types of NHS pension listed below.

This is a final salary pension that can be drawn from the age of 60 (sometimes at 55 with special status, i.e., Mental Health Act Status). The **1995 NHS Pension is calculated** by dividing your current salary by 80, multiplying by the number of days you have worked/earned (reckonable pay) and then dividing that figure by 365 (the number of days in a year). This calculation is the annual pension from the date of retirement to the date of death. The lump sum is this amount multiplied by 3. Members can opt to draw down earlier (from 50 with various percentage deductions.

This 1995 NHS Pension Calculator estimates 1995 Pension entitlement including estimated values if taken before the normal age of retirement (60). Additional information includes values if taking the maximum lump sum.

As an example in the 1995 NHS Pension; Pete has worked for the NHS for 20 years (which is 7,305 in days). His current salary is £80,000 a year. To estimate his pension pension he would start dividing the £80,000 by 80. This would give £1,000. Then he multiplied the £1,000 by 7,305 (the number of days he has worked) and finally he'd divide that number by 365 (which is the amount of days in a year). Pete worked out that his annual pension would be around £20,000 a year (£1,666.00 a month).

The 2008 NHS pension is like the 1995 NHS pension in that it is also based on salary. The 2008 uses the best salary from the last 10 years, rather than your final salary. There is no lump sum with the 2008 Pension, but the calculation is 1/60th rather than 1/80th which will give you a larger amount. However, the normal pension age is 65. Members can take part of their 2008 NHS Pension as a lump sum (£12 for every £1 of pension).

This 2008 NHS Pension Calculator estimates 2008 Pension entitlement including estimated values if taken before the normal age of retirement (65). Additional information includes values if taking the maximum lump sum.

As an example to estimate Pete's entitlement in the 2008 pension, Pete would start by dividing the £80,000 by 60. This equals £1,333.00. Then he would multiply £1,333 by the number of days worked (7,305). Then divide by 365. This is £26,684.93 a year or £2,223.74 a month. A lump sum could be taken but it would cost £1 for every £12 of lump sum. The 2008 pension matures when a person is 65. It can be taken up to 10 years earlier (with varying deductions).

The 2015 Pension is based on annual earnings. Each ear, 1/54th of an annual salary, is put into the NHS Pension pot. The pension matures at State Pension Age. State Pension Age is currently different depending on the year a person is born and varies from 66 to 68.

If Pete, discussed above earned £80,000 for every year that he worked those 20 years in the NHS he would have £29,629.63 for his annual pension (this is £80,000.00 divided by 54 and multiplied by 20). This is purely an example. It is very unlikely that Pete would earn the same amount every year. Also, the 1/54th added each year is re-valued in line with the Consumer Price Index (CPI) with an extra 1.5% on top. This just means it keeps up with inflation. Like a good savings account! A lump sum could be taken but it would cost £1 for every £12 in lump sum.

Everyone who works in the NHS gets a death in service benefit. If someone dies whilst working in the NHS (i.e. not retired) their annual salary (multiplied by 2) is payable to their spouse, partner, legal representative or nominated person. This is a form of life insurance for most people working in the NHS.

Source: Sourced and simplified from the NHS Pension site.

- 1995 NHS Pension Calculator - includes calculations for retiring early;
- 2008 NHS Pension Calculator - includes calculations for retiring early.