Other NHS Pension Scheme benefits

Previous sections of this guide have covered the benefits payable by the NHS Pension Scheme on retirement. However, the scheme also provides important benefits in the event of a scheme member dying or becoming ill, meaning that they can no longer work in their current role. No one plans for these events, but these benefits are valuable for families and often are overlooked.

There are slight differences in the way the cover is provided for the benefits according to the three different parts of the NHS Pension Scheme (1995, 2008 and 2015). However, an overview of the cover is explained below.

Death in service

If a member of the pension scheme dies while still working in the NHS, a lump sum is paid out to the nominated partner. This is based on two times the annual earnings of the member, although each scheme has a different definition of earnings for the basis of this calculation.

In addition, a short-term pension is paid out to the nominated partner for six months based on the pensionable pay at death. A further pension is then paid out after six months at a lower level.

The scheme therefore provides a good level of protection for families. It is, however, worth noting that the pension paid out is linked to the type two ill health calculations (see below).

Pension scheme members should always look at their own circumstances to assess whether they need to top up life insurance cover with policies outside the scope of the NHS. This is particularly relevant to members with younger dependant families.

Death when pension is in payment

If the pension scheme member dies having already taken their pension, there is no lump sum paid on death.

However, a reduced pension will continue to be paid to the nominated partner.

Ill health cover

In addition to death benefits, there are also benefits for members who fall ill and cannot return to their previous work. These fall into two categories:

Type 1 ill health – this applies if the member is unable to do their current NHS job due to permanent ill health. Under this category, a pension will be paid out based on the amount accrued by the member at the time of ill health. No early retirement factors are applied.

Type 2 ill health – this applies where a member is unable to carry out regular employment of like duration to the NHS post due to permanent ill health. (‘Like duration’ means taking into account whether you are working whole-time or part-time in your NHS job.) In this scenario, the pension is enhanced to factor in lost pension growth between the ill health date and the normal retirement age. Each of the three parts of the NHS Pension Scheme has a different calculation of the lost growth.

It is important to note that whilst these are valuable benefits, individuals should always review their personal circumstances. The level of protection you need in the event of unplanned events changes through the stages of life and so constantly needs reviewing.

Note also that benefits may differ for those who are not contributing to the NHS Pension Scheme.

To read parts one, two and three, click here.