Complete Guide to the NHS Pension Scheme (2015/2026 Update)
Table of Contents
Understanding the 2015 CARE Scheme
Since April 1, 2015, most NHS staff have been members of the 2015 NHS Pension Scheme. Unlike the older 1995 and 2008 sections which were "Final Salary" schemes, the 2015 scheme is a Career Average Revalued Earnings (CARE) scheme.
This means your pension is calculated based on your earnings across your entire career, rather than just your salary in the final years before retirement.
How the Pension is Calculated (1/54th)
The calculation for the 2015 scheme is transparent but often misunderstood. Every year you work, you "bank" a specific amount of pension.
The Build-Up Formula
Annual Pension Earned = Pensionable Pay ÷ 54
For example, if you earn £54,000 in a year, you add £1,000 to your annual pension pot for that year.
If you work for 30 years earning £54,000 (adjusted for inflation), your base pension would be roughly £30,000 per year (£1,000 × 30).
Revaluation: Why it beats inflation
The "banked" pension does not sit idle. Every year, the amount you have already accrued is revalued. This protects your pension from inflation.
- Revaluation Rate: CPI (Consumer Price Index) + 1.5%
- Impact: This means your pension grows faster than the cost of living as long as you remain an active member of the scheme.
If you leave the NHS but do not claim your pension (deferred member), your pension is still revalued, but only by CPI (without the extra 1.5%).
Lump Sum Commutation Explained
Unlike the 1995 scheme, the 2015 scheme does not have an automatic lump sum. However, you can choose to create one by giving up part of your annual pension. This is called Commutation.
The Exchange Rate (12:1)
For every £1 of annual pension you give up, you receive £12 of tax-free cash.
Example: You have a pension of £20,000/year. You decide to give up £1,000/year.
- New Pension: £19,000/year
- Lump Sum Received: £12,000 (Tax-Free)
Limits
You cannot commute your entire pension. HMRC limits typically allow you to take up to 25% of the capital value of your benefits as a lump sum.
The McCloud Judgment & Remedy
The "McCloud Remedy" addresses age discrimination that occurred when the 2015 scheme was introduced. Older members were allowed to stay in the 1995/2008 schemes while younger members were forced to move.
The Fix: For the "remedy period" (April 1, 2015, to March 31, 2022), eligible members can choose whether they want those years to count towards their legacy scheme (1995/2008) or the 2015 scheme.
This choice is made at the point of retirement (Deferred Choice Underpin - DCU). Most people will be better off choosing the legacy scheme for this period, especially if they have a final salary link.
Retirement Ages & Early Access
- Normal Pension Age (NPA): In the 2015 scheme, your NPA is the same as your State Pension Age (e.g., 67 or 68).
- Minimum Pension Age: Currently 55 (rising to 57 in 2028). You can claim your pension early, but it will be actuarially reduced because it is being paid out for longer.
- Late Retirement: If you work past your NPA, your pension is increased (actuarially enhanced) to reflect the fact it is being paid for fewer years.