Where NHS staff are losing out on pensions payments

22 May 2024

Data from the NHS Business Services Authority has shown that 209,553 members of the NHS pension scheme are losing pension payments due to a lack of awareness of pension scheme changes.

In April 2022, the old NHS pension scheme, final salary 1995/2008, was closed and all active members were moved to the 2015 scheme. After this date, members could no longer accumulate benefits in the old scheme. However, a final salary link was established to ensure that any future increases in pensionable pay would still enhance the benefits from the old scheme.

The 1995 section, designed at a time when people often worked until 60 then took their pension, has no late retirement factors and as such, no enhancement for not taking the pension at normal pension age.

Until April 2023, those scheme members who took their 1995 section benefits were not allowed to rejoin the NHS pension if they returned to work. Last year, significant changes to retirement flexibilities enabled those members who took their pension benefits and continue to work in the NHS to accrue new benefits in the 2015 scheme. This was to encourage retirees back to work.

Given the changes are relatively new, a report by wealth manager Quilter found that a significant number of members are missing out on pension benefit payments.

A freedom of information request by Quilter showed there are currently 143,632 members of the NHS pension who are 60 years and above and have not yet claimed their benefits from the 1995 section. Similarly, 65,921 members aged 55 or older have not claimed their benefits, despite reaching the normal pension age of 55. In total, 209,553 members are potentially missing out on money every month.

Additionally, members taking their benefits who want to continue working in the NHS must either partially retire or ‘retire and rejoin’, both of which require their employer’s agreement to facilitate. Should their request be denied, they could suffer a financial loss.

Quilter has urged the Department of Health and Social Care (DHSC) to raise awareness of the absence of late retirement factors in the 1995 section, the risk that members could lose their 1995 section payment payments if they don’t claim it at normal pension age and the recent changes offering members flexibility.

Graham Crossley, NHS pension specialist at Quilter, said: “Despite the changes which intend to make things easier for NHS pension members, there remain some barriers to members taking their 1995 section benefits if they want to keep working in the NHS. The two options to take their pension are to partially retire or to ‘retire and rejoin’ – both of which require their employer’s agreement to facilitate.

“People who are trying to take partial retirement are coming up against employer resistance in some parts of the UK. We are already seeing people missing out on their hard-earned pension benefits as a result, and it is vital that change is made to put a stop to this.”

Crossley said it raises a question mark over whether the DHSC should explore the possibility of decoupling the employer’s position as a gatekeeper to a member’s pension benefits.

“This could be easily achieved by scrapping the 10% reduction in pensionable pay rule for partial retirement and amending the application process to not require the employer’s agreement. After all, in the private sector, an employee can take their personal pension benefits without informing their employer or getting their employer’s agreement, so why should the public sector be so different?”

Crossley said if this is not deemed possible, then the DHSC should revisit the introduction of Late Retirement Factors into the 1995 section, which was discounted in the consultation to extend partial retirement to the section.

Crossley added: “Ultimately, change is unlikely to come quickly, so for those already in this position or are concerned they could be missing out, it is vital to seek professional financial advice from someone with expert knowledge in NHS pensions.”

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