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.

If you’re 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’re 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’re a Transitional Member.

Taking a break as a Fully Protected Member:

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 rejoin 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.
Taking a break as a Transitional Member:

If you’re a Transitional Member, things are calculated a little differently.

  • 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, 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 dentist 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 had both increased with inflation. This meant that, 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 benefitted from final salary linking. This meant his 1995 Scheme benefits were now based on his new salary of £80,000, as opposed to his previous salary of £60,000.

If the break had been longer than five years, Joe wouldn’t have benefitted from final salary linking. His benefits would have been increased by inflation only and based on his previous wage, 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.

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