NHS, Claim 1995 Pension and keep paying into 2015 Pension. Any restriction?

Lowtrawler

I know that changes are being made to allow NHS workers to claim their 1995 scheme pension and to continue paying into the 2015 scheme.

Are there any restrictions related to this change.? I know previously there had to be a 24 hour break and then there were restrictions on the hours that could be worked. Under the proposed changes, are they restriction free i.e. is at as simple as claiming the 1995 pension and carrying on paying into the 2015 scheme?

Stubod

At the mo. if you are in the 1995 scheme you cant leave and continue in the 2015 scheme...however, after April this is due to change. You should have recieved a notification letter, bu I am not sure if they have finalised the details yet..

Lowtrawler

Stubod said:

At the mo. if you are in the 1995 scheme you cant leave and continue in the 2015 scheme...however, after April this is due to change. You should have recieved a notification letter, bu I am not sure if they have finalised the details yet..

No letter as yet and have briefly scanned comments from people who have had correspondence but it is unclear if the change is genuinely condition free or, if not, what the conditions are.

Lowtrawler

In July last year, I posted a thread relating to my wife wishing to take her 1995 scheme benefits from NHS England but continue to pay into her 2015 scheme in Scotland. Link below:

https://forums.moneysavingexpert.com/discussion/6371452/nhs-pension#latest

As per the final post in that link, the pension people have promised to respond on a number of occasions but have not yet done so. Most recently last week!

It appears to me that the query raised in my earlier thread is moot if the new rules will allow my wife to take her 1995 scheme benefits without impacting on her ability to keep paying into the 2015 scheme. I just haven't seen any detailed explanation of how this will work or if there are any conditions attached.

Lowtrawler

Having done more research, I have found the following document.

https://www.nhsbsa.nhs.uk/sites/default/files/2023-01/NHSPensions_FlexibleRetirement_DisclosureLetter_202301.pdf

This says:

"Once the proposed changes take effect on 1 October 2023, it will also include any 1995 Section benefits you have.  From age 55, you’ll be able to take between 20% and 100% of all your pension benefits in one or two drawdown payments, without having to leave your current job. Members of the 1995 Section who have a protected minimum pension age of 50 will also be able to claim pension benefits without leaving their job. To do this between the ages of 50 and 55, you’ll need to take 100% of your pension benefits. From age 55, you’ll be able take between 20% and 100% of your benefits in one or two payments, without having to leave work.    You can continue building your pension in the 2015 Scheme.  You won’t need to take a break or change jobs. You can carry on working if you want. You just need to reduce your pensionable pay by 10%. GPs, non-GP providers, and dental practitioners need to reduce their NHS commitments by 10%. "

What does "reduce your pensionable pay by 10%" mean? Will my wife need to cut her hours by 10%? If so, as she is already part-time, what if her employer says no? Alternatively, will the pension administrators simply identify 10% of her pay as no longer pensionable?

Tom_Bradbury

I would say that, normally, people would reduce their hours by 10%, which for a full time employed person on Agenda for Change, is just less than 4 hours a week (3 hours and 45 mins to be exact!).  The reduction in income would be offset by the pension benefits.  The reduction in hours will obviously be less if she is already working less that 37.5 hours a week.

Alternatively, the way I think this can be achieved without reducing hours is her asking Payroll to split her hours and her salary and make 10% of the monthly gross salary as non-pensionable (not sure how they'd do that in ESR, but I would say its feasible - they just need to create a new payroll element and to not apply pension allowances against it).  

Another alternative would be to ask the employer to reduce employment by 10% of her hours on her current role and then re-appoint her on a second employment for the same number of hours she reduced by and then opt out of the pension scheme immediately.  The complication with that is technically, as they are two separate employment contracts, her employer could change the arrangements on the second post or even make it redundant so she ends up with less hours, although that's probably pretty unlikely given how short staffed the NHS is currently.  She'd have to check that Payroll don't push her second employment into NEST which is the default pension scheme if she doesn't join the NHS scheme. 

A third alternative would be to reduce hours by 10% but for your wife to have an agreement with her employer to work the reduced hours as overtime.  Overtime hours for part-timers are generally paid at flat-rate up to when they get to 37.5 hours and are also where it is done over pensionable contracted hours is non-pensionable, so that would achieve the objective, however, again, her employer could turn around and say they don't want her to work anymore overtime so that could be an issue.

Similar to the above, she could work the reduced hours on Bank either directly with her employer if they run their own Bank staff or via NHS Professionals if they use them.  Similar issues though if the employer doesn't want to continue with the arrangement. 

Don't forget that by reducing pensionable pay, she'd also be reducing the death in service benefit.  Hopefully, your wife is as fit as a fiddle but we don't know what is around the corner, and it is surprising how many people die in service and they're not in the pension scheme, leaving nothing for their surviving relative(s). 

The above is all based on the assumption that NHS Pensions simply want you to reduce pensionable pay and not actual hours worked.  Looking at some of the information on the DHSC response to the consultation, it doesn't look like they want people to work less hours - just reduce their pensionable pay if taking their benefits from the 1995 Section. 

Lowtrawler

Thanks for the detailed reply. My wife will hit 60 next year and so hopefully she won't be the first person put into this area of choice and some options will be put to her. I think it would suit her to reduce hours - she works 2.5 days per week and so would want to give up the half day but it would leave them with a gap they would have difficulty filling. Hence, my concern that they may say no. At least if that happens, there are other options.

Lowtrawler

It does appear a little strange that the changes made, intended to encourage people to either come back or work longer, require people to reduce their hours. Surely it s contrary to the original intent?

Even it taking 10% as non-pensionable pay through some of the mechanisms outlined by Tom_Bradbury, effectively people will be working for less pay for that 10% due to the loss of the pensionable element. Again, hardly conducive to expanding resources available to the NHS.

kaMelo

The option of drawdown is available in the 2008 and 2015 schemes, this change just extends the option to those with a 1995 pension too.

Normally for those with 1995 pensions wanting to wind down or step back a little, it would be achieved through retire and return. Due to the much later normal retirement ages of 2008 (65) and 2015 (SPA) schemes this option is less attractive than drawdown given the actuarial reductions that can be suffered. Drawdown means only a reduction on the portion drawdown whereas retire and return could mean a reduction on the entire pension.

Drawdown doesn't really work with the 1995 scheme given the younger retirement age(s). There may be a small subset aged somewhere between 55 and 60 who wish to step back a little, they don't want to suffer an actuarial reduction on their entire pension but they can't afford to not supplement their reduced earnings either. For them a small amount of drawdown added to their reduced earnings, essentially so they are in the same position financially, might make sense.
For anyone who has reached 60 however drawdown over retire and return not only doesn't make sense, in virtually all cases it will lead to someone being financially worse off. 

LightVesselAutomatic

As kaMelo has pointed out, 'retire and return' might be a better option when she reaches 60. This would allow her to retire, claim the 1995 section pension and be re employed on a new contract with no requirement to reduce hours.