As part of the Public Service Pensions Remedy (PSPR), some NHS Pension scheme members have the option to choose between keeping 2008 Section pension benefits for some of their pensionable service or moving these benefits to the 1995 Section.
NHS Pensions have written to all active members who chose to move their pension benefits to the 2008 Section as part of the Choice 2 exercise in 2015. The reason for this is if you’d had the option to carry on building your pension in the 1995 Section when you were contacted as part of the Choice 2 exercise, you may not have chosen to move your benefits to the 2008 Section. So, you can now review that decision as part of the Public Service Pensions Remedy (PSPR), because it will affect your options when you come to retire. Members will only be contacted who are eligible to revisit their Choice 2 decision. If you have not received a letter about this, then you aren’t affected.
Age and retirement: key considerations
The best option for you depends on a number of factors, including the age at which you plan to retire. The earliest you can claim 1995 Section benefits without any reductions is age 60 and in the 2008 Section, it’s age 65.
Financial implications of your choice
Financial modelling by NHS Pensions has shown that members retiring up to age 62 are least likely to benefit from choosing the 2008 Section. If you move your benefits to the 2008 Section, retire at 60, and take the same lump sum as in the 1995 Section, NHS Pensions has estimated your pension could be almost 25% less than if you choose the 1995 Section.
On the other hand, most members retiring at age 64 or above may receive higher benefits if they choose the 2008 Section. These benefits may be even higher if you work beyond age 65 because of the late retirement increase applied in the 2008 Section.
Unfortunately, the decision is not straightforward, and each member’s circumstances are different which will mean for some members it will be difficult to make an informed decision before the deadline.
When you apply for your pension benefits, you will be asked you to choose the benefits you want for the remedy period, which is between 1 April 2015 and 31 March 2022. The choice of benefits you are given when you retire depends on whether you choose 1995 or 2008 Section benefits now. If you choose to move all your pension benefits to the 1995 Section up to 31 March 2022, you’ll be asked to choose between 1995 Section and 2015 Scheme benefits for the pension you built up in the remedy period.
Tools and resources available
If you decide the 2008 Section is better for you, when you apply for your pension, you’ll choose between 2008 Section and 2015 Scheme benefits for the pension you built up in the remedy period. To help you understand more the NHSBSA factsheet NHS Pensions Choice 2 Personas factsheet final V4 22 03 2024.pdf (nhsbsa.nhs.uk), you’ll find an example to help you understand how pension benefits could be affected by this decision. You may also find it helpful to view the Revisiting Choice 2 decision tree on the NHSBSA contingent decisions page Choice 2 Revocation Decision Tree (V3) – 03.2024.pdf (nhsbsa.nhs.uk).
If you decide you’d like to move your pension benefits up to 31 March 2022 into the 1995 Section, send the form included with your letter back to NHS Pensions by the deadline included with your letter.
You may find it useful when making a decision to consider that members can now re-join the 2015 Scheme after claiming their pension benefits. At the time of the original Choice 2 exercise, members of the 1995 Section were not allowed to return to work in the NHS and re-join the 2015 Scheme if they had claimed their pension benefits. These rules changed in October 2023, and members of both the 1995 Section and 2008 Section have flexible options for claiming some or all of their pension and re-joining the 2015 Scheme to build up new pension.
Understanding your normal pension age
Your normal pension age (NPA) is the age you can claim your pension benefits without any reductions for early payment. Your NPA for the 2015 Scheme is the same as your state pension age, or age 65 if this is later. Your current State Pension Age may change before you reach retirement, and this means the age you can claim your 2015 Scheme benefits without any reductions for early payment may also change. A State Pension Calculator is available on the Gov.uk website.
Impact on annual allowance and added years contracts
Choosing either the 1995 Section or 2008 Section for your pension benefits up to 31 March 2022 would not in itself lead to you breaching the annual allowance (AA). However, if you have a significant pay rise in any year this may lead to excess growth and an AA charge may apply. If you choose to reinstate your added years contract, this may also lead to excess growth and an AA charge may apply. This only affects pension input years from 2015/16 onwards.
Once NHS Pensions have received your decision, you won’t be able to change your mind later on, so please take some time to review all the information you have been provided using all the resources available on the NHS Pensions website detailed above. If you are still unsure and feel you need independent financial advice, then you can speak to us at Chase de Vere Dental.
Content correct at time of writing.