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What happens to my NHS Pension if I have a break in service?

Taking a break in service can have an impact on your NHS Pension, depending on the scheme you’re a member of and how long it lasts.

There are many reasons why you may be thinking about taking a break from your role within the NHS. It could be a long-held dream to go travelling or perhaps you want to spend some precious time caring for a loved one. 

Whatever the reasons, taking time away can have an impact on your NHS Pension. How it affects you depends on the scheme you’re a member of and how long you’re away for.

Prior to the changes to the transitional arrangements to the 2015 scheme if you were part of the 1995 or 2008 Section and were less than 10 years from your normal retirement date within that Scheme on the 1st April 2012 then you were known as a Fully Protected Member.

If you automatically moved across to the new scheme when it was introduced on 1st April 2015 or through the tapering arrangements and, as a result, have service in either the 1995 or 2008 Section and the 2015 Scheme, then you were known as a Transitional Member.

Due to the age-related nature of these points this lead to the Government’s plans to remedy discrimination in the transitional arrangements for the 2015 public service pension schemes. At the time of writing the Government are still finalising plans to put this right and where this is a point this is referenced throughout this article.

If your career break is:

  • Less than five years, you’ll rejoin your existing scheme – either the 1995 or 2008 Section. However, you must be under age 60.
  • More than five years, you won’t be able to re-join your existing scheme. Instead, when you return, you’ll automatically join the 2015 Scheme. You will be offered a one off opportunity to transfer your deferred benefits to the 2015 Scheme. If you decide not to transfer your previous pension any historic benefits you had in either the 1995 or 2008 Section will continue to increase with inflation. There are some exceptions following the Government’s plans to remedy discrimination in the transitional arrangements for the 2015 public service pension schemes as explained later in this article.

Taking a break:

As soon as you leave the scheme, your benefits will just increase with inflation, as opposed to increasing with inflation plus 1.5 %.

  • When you rejoin the scheme, as long as your break is five years or less, then you’ll start to accrue benefits again, which will increase by inflation plus 1.5%.
  • As you will also have benefits in a previous scheme (1995 or 2008 Section), your benefits will increase with inflation.
  • If you rejoin the Scheme within five years, final salary linking will commence. This means that, when you retire, your benefits will be linked together and based on your final pensionable pay at retirement. To benefit from final salary linking, you must be an active member of the NHS Pension Scheme at the point of your retirement.

For example:

Joe Bloggs works as a doctor in the NHS. He was 40-years-old when he decided to have a break in service to look after his three young children. At that time, Joe was a Transitional Member, part of the 1995 Section and 2015 Scheme. His pensionable earnings were £60,000.

After 4 years Joe decided to return to work. During the time Joe wasn’t working his pensions in the 1995 Section and 2015 Scheme would have simply increased with inflation. However, upon his return, Joe’s pensionable salary had risen to £80,000, increasing by £20,000.

As his break in service was less than five years, Joe will benefit from final salary linking. This means his 1995 Scheme benefits are now based on his new salary of £80,000, as opposed to his previous salary of £60,000. Joe’s 2015 Scheme benefits will start to accrue again based on inflation plus 1.5%.

If the break had been longer than five years, Joe wouldn’t have benefitted from final salary linking on his 1995 Scheme benefits or the additional 1.5% on his 2015 Scheme benefits. His benefits would have been increased by inflation only and the 1995 Scheme benefits will be based on his previous pensionable earnings, putting him at a serious disadvantage.

Retiring when on a break in service

If you decide to retire from the NHS Pension Scheme when on a break in service, your pension will be based on your pensionable earnings at the time you left the scheme and will then increase with inflation. You will not have final salary linking.

Do I need to take financial advice?

If you are considering taking a career break, it is important to fully understand the implications this may have on your NHS pension. 

As experienced independent financial advisers, we can help you to create a plan of action to ensure you can enjoy your time away from the workplace, free of any concerns.

Content correct at time of writing and is intended for general information only and should not be construed as advice.

Joe Bloggs works as a doctor in the NHS. He was 40-years-old when he decided to have a break in service to look after his three young children. At that time, Joe was a Transitional Member, part of the 1995 Section and 2015 Scheme. His pensionable earnings were £60,000.

After 4 years Joe decided to return to work. During the time Joe wasn’t working his pensions in the 1995 Section and 2015 Scheme would have simply increased with inflation. However, upon his return, Joe’s pensionable salary had risen to £80,000, increasing by £20,000.

As his break in service was less than five years, Joe will benefit from final salary linking. This means his 1995 Scheme benefits are now based on his new salary of £80,000, as opposed to his previous salary of £60,000. Joe’s 2015 Scheme benefits will start to accrue again based on inflation plus 1.5%.

If the break had been longer than five years, Joe wouldn’t have benefitted from final salary linking on his 1995 Scheme benefits or the additional 1.5% on his 2015 Scheme benefits. His benefits would have been increased by inflation only and the 1995 Scheme benefits will be based on his previous pensionable earnings, putting him at a serious disadvantage.

Impact of the Government’s plans to remedy discrimination in the transitional arrangements for the 2015 public service pension schemes

Scheme members who were in service on or before 31 March 2012 and who continued to be in service on or after 1 April 2015 will have their pension returned to their old (legacy) schemes for the period between 2015 and 2022.

This will mean that anyone who re-joins the scheme within 5 years of their break in service will re-join their legacy scheme (2008/1995 Sections) for service up to April 2022 after the Government’s plans have been put in place. These benefits will continue to increase by inflation plus 1.5% as a Practitioner or be linked to final salary as an Officer. Anyone re-joining after a break of more than 5 years won’t be able to re-join their existing scheme. Instead, when they return, they will automatically join the 2015 Scheme. They will be offered a one-off opportunity to transfer their deferred benefits to the 2015 Scheme. If they decide not to transfer their previous pension any historic benefits in either the 1995 or 2008 Section or the 2015 Scheme will continue to increase with inflation.

Under the remedy, when benefits become payable members will receive a choice of whether they would rather receive the benefits of their reformed pension scheme for any service during the period between 2015 to 2022 and this is known as Deferred Choice Underpin or DCU.

It’s worth also pointing out that some members known as ‘contingent members’ may still be able to restore their benefits after being out of the scheme for more than 5 years as part of the Government’s plan to remedy the discrimination. This will only apply to those members who opted out of the scheme for reasons linked to joining the 2015 Scheme prior to April 2022.

Retiring when on a break in service

If you decide to retire from the NHS Pension Scheme when on a break in service, your pension will be based on your pensionable earnings at the time you left the scheme and will then increase with inflation. You will not have final salary linking.

The situation is even worse for those with special class status such as Mental Health Officers (MHO’s) which allows a member to retire at age 55 without a reduction to their benefits. A member must be in a special class post immediately prior to retirement. When a member leaves pensionable employment before age 55 benefits become deferred and do not become payable until the Normal Pension Age of 60

Do I need to take financial advice?

If you are considering taking a career break, it is important to fully understand the implications this may have on your NHS pension.

As experienced independent financial advisers, we can help you to create a plan of action to ensure you can enjoy your time away from the workplace, free of any concerns.

Content correct at time of writing and is intended for general information only and should not be construed as advice.

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