Part 2: How is the pension calculated?

The way in which pension benefits are calculated in the NHS Pension Scheme depends on which part(s) members belong to and whether they are ‘practitioner’ or ‘officer’ members.

Practitioners

GP partners, salaried GPs and locum GPs are all practitioner members of the scheme.

Practitioner pensions are based on a percentage of total career earnings, which are uplifted each year to allow for inflation. For the 1995 section, the pension is calculated by multiplying total career earnings by 1.4%.

For the 2008 section the pension is calculated by multiplying total career earnings by 1.87% of each year’s pensionable earnings. For the 2015 section the pension is calculated by multiplying total career earnings by 1/54th of each year’s pensionable earnings. The difference is partly due to the automatic lump sum in the 1995 section, which isn’t offered with the other two parts of the scheme unless part of the pension is given up.

The uplifting factor each year for all parts of the scheme is 1.5% plus the CPI inflation rate in September of that year. For example, in September 2021 the CPI rate was 3.1% which means total career earnings will be uplifted by 4.6%.

Example 1 – Dr Jones

At 31 March 2021 Dr Jones, who is in the 2015 section, had career earnings of £1,000,000. Multiplied by 1/54th  this means his pension would be worth £18,519.

During the next year Dr Jones earns £75,000.

To calculate Dr Jones’ pension at 31 March 2022:

1. Uplift total career earnings of £1,000,000 at 31 March 2021 by 4.6% = £1,046,000
2. Add 2021/22 income of £75,000 = £1,121,000
3. Multiply uplifted career earnings by 1/54th to give an annual pension of £20,759

It is possible to make similar calculations for the 1995 and 2015 sections. Note that the 1995 practitioner calculation is further complicated by a special adjustment for the period when the GP was working as a hospital doctor or as a GP in training.

Officers

Officer members include practice staff, non-GP partners, hospital posts and some CCG roles. Here the method of calculation is completely different, depending on which part(s) of the scheme the member belongs to.

1995 section

This is a final salary scheme. The pension is based on 1/80^th for each year of service, multiplied by the best salary in the last three years. Salary in this instance is the whole-time equivalent salary.

Example 2

Mrs Smith has worked for the NHS for 25 years and is a member of the 1995 section.

Her final salary was £40,000.

Her pension is calculated as 25/80^ths of £40,000 = £12,500 annual pension

2008 section

This is similar to the 1995 calculation except it is based on 1/60^th for each year of service, multiplied by the reckonable pay, which is the average of the best three consecutive years within the last 10 years.

2015 section

This is a career average arrangement, and the pension is based on 1/54th for each year of service.

Early retirement

In the 1995 section the Normal Retirement Age (NRA) is 60, in the 2008 section it’s 65 and in the 2015 section the NRA is the same as your state pension age. These are the ages at which members receive their accrued benefits without any reduction.

Pension benefits for members retiring early are calculated in the normal way, depending on which part(s) of the scheme they belong to and whether they are officers or practitioners. Then early retirement factors are applied. The younger the member retires, the smaller the pension will be, partly because the benefits accrued will be lower.

Note that pension information on Total Reward Statements from the NHS Pension Scheme only show pension accrued and do not factor in early retirement.

Special classes        

The calculation for the special classes referred to in Part 1 of this guide are not covered here.

Read part three here. Part one can be found here.