Up to 209,553 NHS pension scheme members could be missing out on their pension payments due to a lack of awareness around the recent pension scheme changes, a freedom of information request from Quilter has revealed.

From 1 April 2022, the old NHS pension scheme (final salary 1995/2008) was closed, and all active members were moved to the new the 2015 scheme.

Whilst members were unable to accumulate benefits in the old scheme after this date, a final salary link was established to ensure that any future increases in pensionable pay would still enhance the benefits from the old scheme.

Quilter pointed out, however, that the 1995 section was designed when retirement was more binary and, unlike the later 2008 section and 2015 Scheme, the 1995 Scheme has no late retirement factors, meaning there is no enhancement for not taking a pension at normal pension age.

It also pointed out more recent changes to encourage retirees back to work, which enabled 1995 section members to take their 1995 section pension benefits, continue to work in the NHS and accrue new benefits in the 2015 scheme.

However, it acknowledged that this means there are now very few reasons for those eligible NHS pension members not to take their 1995 section benefits at normal pension age.

Quilter stressed that, as this is a relatively new issue and not all members understand the rule changes or how they can benefit, there are now a "significant" number of members who are missing out on pension benefit payments.

Indeed, the data from the NHS Business Services Authority showed that there are 143,632 members of the NHS pension who are 60 years old or older and have not yet claimed their benefits from the 1995 section, even though they have reached the normal pension age of 60.

Similarly, 65,921 members are 55 or older and haven’t claimed their benefits from the 1995 section, despite reaching the normal pension age of 55. In total, 209,553 members are potentially missing out on money every month.

Quilter also warned that if members do not claim the pension at normal pension age those pension benefit payments will be lost as they are not typically backdated.

And despite recent changes intended to make things easier for scheme members, Quilter argued that barriers remain to members taking their 1995 section benefits if they want to keep working in the NHS.

In particular, the company explained that members taking their 1995 section benefits who want to continue working in the NHS must either partially retire or ‘retire and rejoin’ – both of which require their employer’s agreement to facilitate.

Should the employer deny the request, the member could suffer a financial loss as they would be denied access to their 1995 pension benefits, unless the member opts to take drastic action such as leaving their employer.

Given this,Quilter urged the Department for Health and Social Care (DHSC) to take action to increase awareness around the absence of late retirement factors in the 1995 section, and ensure members are aware that they can effectively lose 1995 section pension payments if they don’t claim it at normal pension age.

It also called on the government to increase awareness around the recent changes from DHSC to retirement flexibilities in the 1995 section that could “significantly” help members, urging the DHSC to update the outdated process that NHS pension members must undertake to access their pensions.

In particular, Quilter suggested disconnecting the employer link, so the employer’s role is simply to facilitate access to the pension, rather than as a gatekeeper.

Commenting on the findings, Quilter NHS pension specialist, Graham Crossley, said: “People who are trying to take partial retirement are coming up against employer resistance in some parts of the UK. We are already seeing people missing out on their hard-earned pension benefits as a result, and it is vital that change is made to put a stop to this.

“It begs the question, therefore, whether the DHSC should explore the possibility of decoupling the employer’s position as a gatekeeper to a member’s pension benefits. This could be easily achieved by scrapping the 10 per cent reduction in pensionable pay rule for partial retirement and amending the application process to not require the employer’s agreement.

“After all, in the private sector, an employee can take their personal pension benefits without informing their employer or getting their employer’s agreement, so why should the public sector be so different?

“If this is not deemed possible, then the DHSC should revisit the introduction of Late Retirement Factors (LRFs) into the 1995 section. This was disappointingly discounted in the consultation to extend partial retirement to the 1995 section, as the belief was that partial retirement would negate the need for LRFs.

“Ultimately, change is unlikely to come quickly, so for those already in this position or are concerned they could be missing out, it is vital to seek professional financial advice from someone with expert knowledge in NHS pensions.

"The rules have changed substantially in recent years, and it is vital that you are well equipped to make the best possible decisions for you to ensure you do not lose the pension payments you have spent a lifetime accruing.”

---