NHS Pension Scheme: A Complete Guide to the 2015 CARE Scheme

The National Health Service Pension Scheme is one of the largest public sector occupational pension arrangements in the world, covering over 1.8 million active members across England and Wales. Its complexity has grown substantially over the past decade, with successive reforms culminating in the 2015 Career Average Revalued Earnings (CARE) scheme and the subsequent McCloud remedy adding further layers of transition rules. This guide explains how the scheme works today, who it affects, and what members need to consider when planning their retirement.

The Structure of the NHS Pension Scheme

The NHS Pension Scheme in England and Wales is administered by NHS Business Services Authority (NHSBSA). There are also separate but broadly similar arrangements for Scotland and Northern Ireland. This guide focuses on the England and Wales scheme.

Historically, the NHS has operated three main scheme sections:

• 1995 Section — a final salary arrangement, normal pension age 60, with a 1/80th accrual rate and an automatic lump sum of three times pension.
• 2008 Section — also final salary but with a normal pension age of 65, 1/60th accrual, and no automatic lump sum (though one could be commuted from pension).
• 2015 Scheme — the current CARE arrangement, with a normal pension age linked to State Pension Age (currently 67, rising to 68), and a 1/54th accrual rate applied to pensionable pay each year.

From 1 April 2022, all active NHS pension members build new pension in the 2015 Scheme only. Pre-2022 service in the legacy schemes is preserved and will be paid separately at retirement.

How the 2015 CARE Scheme Works

Under the 2015 Scheme, each year of pensionable service adds 1/54th of your pensionable pay to your pension pot. For example, if your pensionable earnings in 2025–26 are £54,000, you earn £1,000 of annual pension for that year. If your earnings are £70,000, you earn approximately £1,296 of annual pension.

This benefit is then revalued each April using the change in the Consumer Prices Index (CPI), helping to protect its purchasing power during your working life. The revaluation applies to all accrued pension in the scheme, not just the current year's accrual.

Pensionable pay under the 2015 Scheme includes:

• Basic salary
• Certain allowances (where contractually pensionable)
• London weighting
• It excludes overtime, discretionary bonuses, and non-contractual payments

It is important to understand that the 1/54th rate is applied to gross pensionable pay before tax, so higher earners accrue pension relatively quickly in nominal terms, though the annual allowance can become a significant constraint.

Normal Pension Age and Early Retirement

The Normal Pension Age (NPA) under the 2015 Scheme is tied to your State Pension Age, currently 67 for those born after April 1960, and scheduled to rise to 68 (though this change has been subject to government review). If you take your pension before NPA, an early retirement reduction factor is applied — roughly 5% per year before NPA.

You can choose to take your pension from age 55 (rising to 57 in April 2028 under the wider pension freedom age increase, though the NHS Scheme rules will apply). Members with 1995 Section service retain a protected pension age of 60 for that legacy benefit.

Pensioners who retire early on ill-health grounds may qualify for enhanced benefits under two tiers. Tier 1 ill-health provides the pension you have accrued to date, paid immediately without early retirement reduction. Tier 2 provides an enhancement equivalent to half of the prospective pension you would have earned to NPA, payable where the member cannot undertake any regular employment.

Lump Sum Commutation

The 2015 Scheme does not provide an automatic tax-free lump sum. However, members may commute up to 25% of the capital value of their pension for a lump sum. For every £1 of annual pension you give up, you receive £12 in lump sum.

Following the abolition of the Lifetime Allowance in April 2024, the maximum tax-free lump sum is now capped at £268,275 (the Pension Commencement Lump Sum limit), unless the member holds transitional tax-free cash protection. The commutation calculation needs careful analysis — giving up guaranteed index-linked pension for a cash lump sum is not always advantageous, particularly for members with a longer life expectancy.

Members in the 1995 Section automatically receive three times their annual pension as a lump sum, with the option to commute further. This automatic lump sum from legacy service is treated separately from the 2015 Scheme commutation.

The McCloud Remedy — What It Means for NHS Members

Following the Court of Appeal judgment in the McCloud case (2018) and subsequent legislation, it was determined that the transitional protections given to older workers when the 2015 Scheme was introduced amounted to unlawful age discrimination.

The remedy, implemented through the Public Service Pensions and Judicial Offices Act 2022, means that eligible members — broadly those who were in service before 1 April 2012 and remained active members through to at least 31 March 2022 — are entitled to a deferred choice about how their pensionable service from 1 April 2015 to 31 March 2022 (the "remedy period") is treated:

• They can take the "remedy period" benefits calculated under their legacy (1995 or 2008) Section rules, or
• They can take those benefits under the 2015 Scheme rules.

The choice is made at retirement (or on earlier exit), and members will be shown both options. In many cases, legacy final salary benefits will be higher for the remedy period — particularly for members whose pay increased substantially in later years — but this must be assessed individually.

NHSBSA has written to all affected members and should be providing Annual Benefit Statements that reflect the remedy. If you are uncertain whether you are in scope, contact NHSBSA or a regulated financial adviser.

Contribution Rates

NHS employee contribution rates are tiered according to pensionable pay:

Pensionable Pay (2025–26)	Employee Contribution Rate
Up to £13,259	5.2%
£13,260 – £26,831	6.5%
£26,832 – £49,999	8.3%
£50,000 – £111,999	10.4%
£112,000 and above	12.5%

Employer contributions are substantially higher — currently around 23.7% of pensionable pay — funded partly by NHS trusts and partly by a government top-up. The total contribution rate makes the NHS Pension Scheme exceptionally valuable compared to typical private sector arrangements.

Contributions attract tax relief at your marginal rate. Higher-rate taxpayers therefore receive 40% relief on their contributions.

Annual Allowance — A Growing Issue for Senior Clinicians

For senior NHS staff — consultants, GPs, and senior managers — the annual allowance can pose a significant problem. The standard annual allowance is £60,000 (from 2023–24), covering both pension accrual and any other pension contributions.

For defined benefit schemes, pension accrual is measured by taking the increase in pension during the tax year, multiplying by a factor of 16, and adding any increase in lump sum entitlement. Senior earners with significant pay growth can easily breach the annual allowance, triggering a tax charge.

The NHS has had a Scheme Pays facility for some years, allowing members to elect for the scheme to pay their annual allowance charge in exchange for a reduction in their ultimate pension. However, this reduces your eventual pension income and should not be treated as routine. Independent advice from a specialist NHS pension adviser is strongly recommended if you regularly approach or breach the allowance.

Options on Leaving the NHS

If you leave NHS employment before retirement, your options depend on your service length:

• Less than two years — you may request a refund of your own contributions (employer contributions are not refunded). This is taxed at 20% on the first £20,000 and 50% on the remainder.
• Two years or more — your pension is preserved ("deferred") in the scheme and will be revalued by CPI until you claim it at or after NPA.
• Transfer out — deferred members can request a Cash Equivalent Transfer Value (CETV) and transfer to another registered pension scheme, including a SIPP. This is a highly significant decision. The CETV may appear substantial, but it represents the capital cost of replacing guaranteed index-linked income. Regulated financial advice is mandatory before transferring a DB pension worth £30,000 or more.

Returning to NHS employment after a break means you automatically rejoin the 2015 Scheme and begin accruing new pension. If you have a deferred 1995 or 2008 Section benefit, it remains separate and deferred.

Additional Voluntary Contributions

NHS members can make AVCs through the NHS AVC arrangement, administered by Prudential (now Utmost). These are defined contribution, and the fund grows free of UK income tax and capital gains tax. AVCs can be used to provide additional tax-free cash at retirement (up to the permitted maximum) or to supplement pension income in drawdown.

AVCs within the NHS scheme are separate from any SIPP or workplace pension held with a private provider.

Practical Considerations for NHS Members Abroad

NHS members who have left the UK should be aware that their deferred NHS pension will continue to be revalued by CPI in deferment, providing some inflation protection. On retirement, the pension is paid in sterling and is subject to UK income tax. Double Taxation Agreements between the UK and many countries — including Cyprus, the UAE, Spain, and Greece — may provide relief from double taxation on UK government pension income, though the interaction varies by country. HMRC Form R43 enables non-residents to reclaim overpaid UK income tax.

The NHS Pension Scheme is classified as a "public service pension scheme" for the purposes of QROPS rules. This means it cannot be transferred to a QROPS — a rule that has applied since 2015 to prevent the dilution of public sector liabilities. Transfers out are only possible to other UK-registered pension schemes.

Compliance note: Pension values and contribution rates in this guide reflect the rules as at June 2026 and are subject to change. The NHS Pension Scheme rules are set by HM Treasury and administered by NHSBSA; confirm current figures directly with NHSBSA or via your employer. This guide is for information only and does not constitute regulated financial advice. The decision to transfer a defined benefit pension or to commute pension for a lump sum should be made only after taking regulated advice from an FCA-authorised specialist.

How Global Investments Can Help

Global Investments works with NHS professionals at all career stages — from newly qualified doctors and nurses considering their first SIPP alongside their NHS pension, to senior consultants navigating the annual allowance, to retired NHS staff living abroad managing the interaction between their NHS pension income and the tax rules of their country of residence.

Our advisers understand the specific complexities of the NHS Pension Scheme, including the McCloud remedy, the tiered contribution structure, and the restrictions on transferring public sector pensions. We can help you model projected retirement income, assess whether voluntary contributions or AVCs make sense, and ensure that your NHS pension integrates coherently with any private pensions, property income, or investment portfolios you hold. Contact our team to arrange an initial consultation.