How does the NHS pension work?
The NHS is well known for having a great pension scheme, with members receiving a “defined benefit” on retirement, effectively giving them a guaranteed income for the rest of their life which is calculated based on their previous NHS salary and years of experience.
This is quite different to the more common “defined contribution” scheme, where you and your employer both pay into a “pot” over the course of your career. That pot is then normally used to buy an “annuity”, which is a financial product that gives you a guaranteed income for the rest of your life.
The defined benefit type of pension is rare outside of the public sector, and tends to provide a higher income during retirement than private pension schemes as it is administered by the government and NHS, so none of your money is going towards the profit margin of your pension provider or annuity provider.
However, it can be complex to understand exactly how the NHS pension works. We’ve outlined answers to some key questions below.
Where does my NHS pension contribution go?
Because the NHS pension is a defined contribution scheme, instead of the money that you pay into the scheme growing your personal pot, your pension contributions are effectively covering the cost of running the current scheme.
So, if you imagine you work in the NHS and one of your parents worked in the NHS but has now retired, your pension contributions now help to fund the money they receive each month.
Don’t worry though – in the event that the NHS ceased to exist and new contributions to the scheme stopped, you would still receive your pension. This is because the scheme is backed by the UK Government.
How much is my contribution to the NHS pension?
Most of the cost of the NHS pension is covered by employers, with every NHS organisation contributing 14.38% of the basic salary for each staff member towards the scheme.
The other costs of the pension come out of your monthly pay. The amount which you pay depends on how much you earn as pensionable pay:
- Up to £13,246 – 5.1%
- Between £13,247 and £16,831 – 5.7%
- Between £16,832 and £22,878 – 6.1%
- Between £22,879 and £23,948 – 6.8%
- Between £23,949 and 28,223 – 7.7%
- Between £28,224 and £29,179 – 8.8%
- Between £29,180 and £43,805 – 9.8%
- Between £43,806 and £49,245 – 10%
- Between £49,246 and £56,163 – 11.6%
- Between 56,164 and £72,031 – 12.5%
- Above £72,031 – 13.5%
What counts as pensionable and non-pensionable NHS pay?
Not all your taxable pay may count for the purposes of your pension, particularly if you work overtime, receive bonuses, or receive expenses. These local payments are counted as “non-pensionable”.
Non-consolidated payments, such as those included in the NHS pay deal 2023, are also non-pensionable.
Non-pensionable elements of your pay will not contribute towards determining which contribution tier you are in, or how much pension you will ultimately receive.
Is HCAS (London weighting) pensionable pay?
Yes, the Department for Health and Social Care have confirmed that the High Cost Area Supplement counts towards pensionable pay.
Are RRPs (Recruitment and Retion Premia) pensionable pay?
Yes, NHS Confederation have confirmed that RRPs should count as pensionable pay.