Can anyone with knowledge of the NHS Pension Scheme help re: imminent Ill Health Retirement?

[Deleted User]

It's regarding someone who has served in The NHS continuously for over 30 years, full time and a member of The Superannuation Scheme.  Now being retired early on health grounds. as no longer able to work in any area within or outwith The NHS.

Is it likely (I am out of date with information as I retired a long time ago) that the 30+ years service will be made up to the maximum 40 years or will the pension be based on the precise number of years in service and take into account the 'best' year's salary of the last three years?

This may be impossible to answer but, as retirement is imminent and being processed now, is there any idea of how long the process takes before the pension (and lump sum) are paid to the person?

Although the monthly pension will be taxable, is the lump sum also taxed?   The "PIP" payments being received are not taxed.  Also, will the person continue to pay National Insurance Contributions once the early retirement and pension are finalized?

Thank you for any information or advice - it will be very much appreciated.

Marcon

[Deleted User] said:

It's regarding someone who has served in The NHS continuously for over 30 years, full time and a member of The Superannuation Scheme.  Now being retired early on health grounds. as no longer able to work in any area within or outwith The NHS.

Is it likely (I am out of date with information as I retired a long time ago) that the 30+ years service will be made up to the maximum 40 years or will the pension be based on the precise number of years in service and take into account the 'best' year's salary of the last three years?

This may be impossible to answer but, as retirement is imminent and being processed now, is there any idea of how long the process takes before the pension (and lump sum) are paid to the person?

Although the monthly pension will be taxable, is the lump sum also taxed?   The "PIP" payments being received are not taxed.  Also, will the person continue to pay National Insurance Contributions once the early retirement and pension are finalized?

Thank you for any information or advice - it will be very much appreciated.

See https://www.nhsbsa.nhs.uk/sites/default/files/2017-05/Ill%20health%20retirement%20tiers%20and%20FAQs%20%2805.2017%29%20V8.pdf

That will answer most of the above - make sure you know which section(s) of the NHS scheme they were in.

It isn't possible to answer the 'how long...' question with any degree of certainty, I'm afraid.

The tax free lump sum isn't taxable - the clue is in the name! NIC are not payable on pension income; as the person is unable to work, they won't have earnings which could be subject to NIC.

Flugelhorn

I think determination of the benefits depends on which part of the scheme they are in: 
https://www.nhsbsa.nhs.uk/sites/default/files/2017-05/Ill health retirement tiers and FAQs (05.2017) V8.pdf

lump sums are not taxable and you don't pay NI on pension payments 

Marcon

In the absence of paying any more NI, worth checking their state pension projection as of now (you need to read the text which will be under the large green box at the top, which will say in more years of NI are required for a full state pension): https://www.gov.uk/check-state-pension

(a) if there are any gaps in the NI history, consider if it is worth paying to fill these; or 
(b) check if they are eligible for any benefits which would give an automatic NI credit: https://www.gov.uk/national-insurance-credits/eligibility

hyubh

[Deleted User] said:

It's regarding someone who has served in The NHS continuously for over 30 years, full time and a member of The Superannuation Scheme.  Now being retired early on health grounds. as no longer able to work in any area within or outwith The NHS.

Is it likely (I am out of date with information as I retired a long time ago) that the 30+ years service will be made up to the maximum 40 years or will the pension be based on the precise number of years in service and take into account the 'best' year's salary of the last three years?

This may be impossible to answer but, as retirement is imminent and being processed now, is there any idea of how long the process takes before the pension (and lump sum) are paid to the person?

Although the monthly pension will be taxable, is the lump sum also taxed?   The "PIP" payments being received are not taxed.  Also, will the person continue to pay National Insurance Contributions once the early retirement and pension are finalized?

Thank you for any information or advice - it will be very much appreciated.

Post-McCloud, every active member is now accruing pension in the 2015 scheme (CARE not final salary). As with the older sections, there are two tiers of ill health retirement. Tier 1, which involves no actuarial reduction but no enhancement either, requires the member to be unable to do their current NHS job due to permanent ill health. Tier 2, which involves an enhancement of 1/2 prospective membership to NPA, has that requirement plus being unable to carry out regular employment of like duration to NHS employment due to permanent ill health. In the 2015 scheme, the member's Normal Pension Age is their state pension age.

What you said about final pay figures is irrelevant for the 2015 scheme tier 2 enhancement (it isn't irrelevant for the final salary part of the pension, but the enhancement itself isn't calculated with it). Instead, the enhancement is calculated by taking the pension actually accrued and pro-rating it upward for the extra notional service to NPA. 

Details are in the regs here, both for the ill health criteria and how the enhancement is calculated: https://www.legislation.gov.uk/uksi/2015/94/part/5/chapter/5/made

The lump sum from the legacy scheme will be tax free as normal. You don't pay NICs on pension payments.

[Deleted User]

Thank you, so very much, Marcon, Flugelhorn and hyubh, for these quick and really helpful replies, the links and the other information too.  I would never have been able to find them myself.  

The person has been treated wonderfully well by 'work' staff and all the medical and nursing staff involved.  It may be difficult but I'll have time tomorrow to read through all the links and do my best to get to grips with it.  We all want to be as supportive as possible without being intrusive - eager to help in any way, especially when asked.

Until this awful illness the person had never been off sick at any time in the 30+ continuous full-time years in The NHS.

I really appreciate all the information you have provided.  Homework tomorrow!

[Deleted User]

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I have had a very quick look and will need much more time tomorrow but, for now, re:  "Tier 1, which involves no actuarial reduction but no enhancement either, requires the member to be unable to do their current NHS job due to permanent ill health. Tier 2, which involves an enhancement of 1/2 prospective membership to NPA, has that requirement plus being unable to carry out regular employment of like duration to NHS employment due to permanent ill health. In the 2015 scheme, the member's Normal Pension Age is their state pension age"

The person did not ask for ill health retirement - it was suggested to them by  medical staff.  The health condition is progressive and irreversible and (not sure but I think it might have been the Occupational Health Consultant) who said that they are not fit (and will not become fit) for any work in the future either in The NHS or in any other type of employment.  At my very brief glance it looks as if Tier 2 is the relevant one.

This is exactly the information I was hoping to find although I don't know which section of the NHS Superannuation Scheme the person is in.  Continuous employment is over 30 years so maybe it would be the earlier scheme as there has been no break in employment.  I had not heard ofr "McCloud" but just need to do more reading.

Thank you all again. 

Marcon

[Deleted User] said:

.

This is exactly the information I was hoping to find although I don't know which section of the NHS Superannuation Scheme the person is in.  Continuous employment is over 30 years so maybe it would be the earlier scheme as there has been no break in employment.  I had not heard ofr "McCloud" but just need to do more reading.

Where's @hugheskevi when you need him... hopefully along soon to comment!

hyubh

[Deleted User] said:

This is exactly the information I was hoping to find although I don't know which section of the NHS Superannuation Scheme the person is in.  Continuous employment is over 30 years so maybe it would be the earlier scheme as there has been no break in employment.  I had not heard ofr "McCloud" but just need to do more reading.

If they are an active member currently, they will definitely be in the 2015 scheme as of 1 April 2022. You haven't clarified this person's age, or whether they chose to switch to the 2008 scheme previously, but other things being equal they would have been put back into the 1995 scheme for the whole period 1 April 2015 to 31 March 2022. On drawing their pension, they would then have a choice of switching that period to be 2015 scheme service instead ('deferred choice underpin').

The normal pension age of the 1995 scheme is 60 (55 if have special class status), which in a non-ill health situation can make electing to stick with it for the 'remedy period' of 2015-2022 a no brainer if you draw your NHS pension well before SPA. An ill health retirement will complicate this, given electing for 2015 scheme service will provide a higher accrual rate (if CARE not final salary), but without the cost of an actuarial reduction. NHS Pensions should be providing what each option will give however, so the choice is not made in the dark.

hugheskevi

Marcon said:

[Deleted User] said:

This is exactly the information I was hoping to find although I don't know which section of the NHS Superannuation Scheme the person is in.  Continuous employment is over 30 years so maybe it would be the earlier scheme as there has been no break in employment.  I had not heard ofr "McCloud" but just need to do more reading.

Where's @hugheskevi when you need him... hopefully along soon to comment!

I can't really add anything to the answer from @hyubh in the chain above.

The person will be in the 2015 scheme, as everyone in public service schemes was moved to the new 2014/2015 schemes from 1 April 2022.

The McCloud choice will be

(1) Service in the pre-2015 scheme to 31st March 2022 and in the 2015 scheme thereafter

(2) Service in the pre-2015 scheme to 31st March 2015 and in the 2015 scheme thereafter

However, that does not affect the ill-health assessment which is the first step in the process. Once the outcome of ill-health assessment is known then the scheme administrator will prepare quotes under both the options above for the member to choose from.

Marcon

Many thanks to both @hugheskevi and @hyubh - much appreciated by me as well as OP!