Business Services Organisation
Members can increase their pension benefits by paying additional contributions.
You can increase the amount of benefits you receive at retirement by paying extra contributions; paying additional contributions is voluntary and there are different ways of doing this and each buys you different benefits.
Contributions paid to the HSC Pension Scheme and its Money Purchase providers to increase benefits qualify for full tax relief but cannot exceed 100% of your taxable pay.
Since 6 April 2006 HM Revenue and Customs (HMRC) had set an individual lifetime allowance (LTA) limit on tax free pension savings in all registered pension schemes. The limit mainly affected high earners and for most people it resulted in more tax relief being available for savings to increase their retirement benefits. On 15 March 2023, the Chancellor of the Exchequer announced changes to the lifetime allowance to support workforce retention. The lifetime allowance charge was removed from 6 April 2023 and abolished in April 2024. If you retire on or after 6 April 2023 there will be no lifetime allowance charge on the pension benefits paid to you. The maximum retirement lump sum, known as the pension commencement lump sum, you will be able to take tax-free is £268,275, unless you have lifetime allowance protection from HMRC.
HMRC will not allow you to withdraw a tax-free lump sum and receive further tax relief by reinvesting the money back into a registered pension scheme. This is known as ‘recycling lump sums’ and could apply if the money is reinvested as a lump sum or in monthly payments. It is possible that you could be affected by this rule if you retire within two years of making an election to buy additional benefits. If you think you could be affected discuss your plans with a professional financial adviser before proceeding.
The Annual Allowance is set by HMRC and is currently £60,000. Your annual allowance may be tapered down to a lower limit from 6th April 2020 if you have a taxable income of more than £200,000, this increased to £260,000 from 6th April 2023. Your annual allowance may be lower if you have flexibility accessed any defined contribution pension provisions. The Annual Allowance is the maximum amount of tax free growth that your pension savings can grow by, excluding any State Pension, in a tax year. Growth in the HSC Pension Scheme includes any added pension or added years purchased or being purchased during that tax year. If the growth in the HSC Pension Scheme (and any other pension arrangement, including contributions to Money Purchase benefits) exceeds the Annual Allowance you may incur an Annual Allowance charge. More information about the Annual Allowance can be found here.
Additional information regarding the options available can be found by exploring the tabs below:
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Forms
Additional Pension
Preliminary Application for Purchase of Additional Pension
Election to Purchase Additional Pension
Early Retirement Reduction Buy Out (ERRBO)
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Increasing your Benefits
Tax-free limits
Limit on contributions
Contributions paid to the HSC Pension Scheme and its Money Purchase providers to increase your pension benefits qualify for full tax relief, but cannot exceed 100% of your taxable pay.
Limit on benefits
Since 6 April 2006, HM Revenue & Customs (HMRC) has set an individual lifetime allowance (LTA) limit on tax-free pension savings in all registered pension schemes, like the HSC Pension Scheme. The limit mainly affects high earners.
For most people it results in more tax relief being available for savings to increase their retirement benefits. The LTA applies to all your pension savings including those through additional contributions.
Recycling of Pension Commencement Lump Sums
HMRC will not allow you to withdraw a tax-free lump sum and receive further tax relief by reinvesting the money back into a registered pension scheme. This is known as “recycling lump sums” and could apply if the money is reinvested as a lump sum or in monthly payments. It is possible that you could be affected by this rule if you retire within 2 years of making an election to buy additional benefits. If you think you could be affected discuss your plans with a professional financial adviser before proceeding.
Buying Additional Pension (AP)
The AP facility is a flexible arrangement that allows you to increase your Scheme pension by a method, which at the outset clearly sets out both how much, in current pension terms, the purchase is worth and how much the purchase will cost.
AP is paid at the same time as your main Scheme pension. If it is paid before your normal retirement age it will be reduced to take account of its early payment.
AP can be bought at any time during the year as either personal cover, ie increases your own pension benefits only or with dependants’ cover, ie increases your own pension and the benefits that will be payable to your spouse, partner or dependent children after your death.
AP does not include an automatic lump sum but you can include your AP in calculating “pension commutation.”
Irrespective of your working pattern, you will get the same amount of AP at retirement. The cost of purchasing AP is the same whether you work full time or part time.
How much can I buy?
You can buy any amount in units of £250 annual pension up to a maximum total purchase of, currently, £5,000 for the 1995 and 2008 Sections, and a maximum of £6,500 in the 2015 Scheme.
If you buy AP with cover for dependants each £250 unit of AP also increases your partner’s survivor pension by £93.75 a year. In the case of child allowance the increase is £187.50 to be distributed according to the rules of that benefit.
AP unit purchases are revalued in line with inflation both before and after they come into payment.
Can everyone apply to buy AP?
Yes, provided that you are a contributing member of the Scheme and not absent from work for any reason. You can make any number of AP purchases throughout your Scheme membership before reaching your normal retirement age. You must also complete the purchase before your normal retirement age.
In some circumstances your employer may wish to buy some AP for you. They would do this by making a single payment on your behalf.
How much does AP cost?
The cost of AP is determined by factors provided by the Scheme Actuary. It can be paid for either by a single lump sum or by instalments from your pay, over a complete number of years of your choice, up to a maximum of 20 years.
A tool to calculate the cost of your intended purchase can be found on our website at Calculators.
Will I pay the same amount every month?
Usually yes. Purchase by instalments is however subject to review based on advice from the Scheme Actuary, and following review the cost of future instalments of an existing arrangement could be changed. Actuarial reviews of the Scheme take place every four years.
What if I have short breaks in my HSC employment?
If you have breaks in HSC employment of less than 12 months eg changing jobs with another HSC employer, you will be given the opportunity to continue your agreement.
You will need to make up any missing instalments. If this happens tell your new employer about your AP purchase and make arrangements to pay the outstanding instalments.
What if I stop paying my instalments?
If you stop paying instalments within the first 12 months because you die or retire on ill-health grounds, the agreement will be cancelled and your additional contributions will be returned.
If you stop paying instalments after 12 months because you die or retire on ill health grounds, you will be credited with the AP amount and all future additional contributions will be waived. If you die, this will only have effect if you have taken AP with dependants cover.
If you stop paying instalments for any other reason, the AP agreement will be terminated and you will be credited with the proportion of the AP that you have paid for.
How do I apply?
If you are interested in purchasing AP you should visit our website where you can model the various options available to you to find out how much it is going to cost. You can ask your Employer to help you with this by completing form AP1 which can be obtained from our website in the ‘forms’ tab above.
Once you have decided to proceed, you should complete application Form AP2 and then pass the form to your employer.
You may be able to increase your benefits through the AP arrangement as well as other methods described in this factsheet. This is subject to overall HMRC and Scheme limits.
Money Purchase Benefits
A Money Purchase AVC arrangement allows you to make additional contributions to build up a separate retirement fund. These contributions are invested and then used to supplement your main Scheme benefits at retirement, or later.
You can take up to 25% of the fund value as a tax-free lump sum in addition to any main Scheme lump sum. The rest of your fund must be used to buy an extra pension.
You can also make separate contributions to the company you choose to increase the lump sum your dependants will receive from the main Scheme if you die before you retire.
You can increase your benefits through a Money Purchase arrangement, as well as other methods described in this section. This is subject to overall HMRC and Scheme limits.
HSC Scheme Provider
You can take out a Money Purchase ‘Group’ AVC through the HSC Scheme. These arrangements are part of the Scheme, but are run by a chosen provider on our behalf.
Contributions are taken from your pay and you can choose how much to pay. You can normally change or stop the amount you pay and switch between funds. We have negotiated special HSC terms for these arrangements, which are reviewed regularly and there are no commission charges. But because the additional contributions are invested with an external provider, the HSC Scheme cannot guarantee your fund or the amount of the pension it will produce.
Once in payment, the Scheme will guarantee you payment of any pension you receive through HSC arrangements. To find out more about HSC Money Purchase Group AVCs please see the tab below.
The HSC Money Purchase AVC provider is:
Standard Life Group Pensions Public Sector
Standard Life House
30 Lothian Road
Edinburgh EH1 OWT
www.standardlife.co.uk/nhs
Helpline: 0800 33 33 06If you are interested in this type of arrangement, you should seek independent financial advice and then contact the bank or insurance company of your choice. If you are considering a Free Standing arrangement it is worth remembering that commission may be deducted from your contributions before they are invested and there are no special HSC terms. The HSC Scheme cannot guarantee payment of a pension you receive through a freestanding arrangement.
Stakeholder Pensions
Stakeholder Pensions are an alternative way of saving for retirement but are not normally recommended as a main pension for someone who can join the HSC Scheme. If you are prevented from joining the Scheme for some reason and receive a moderate salary your employer must offer you a HSC Stakeholder Pension.
If you are a member of the HSC Scheme you can also use a HSC Stakeholder Pension to top up your main Scheme benefits. You can do this instead of, or as well as, other top-up arrangements.
Because Stakeholder contributions are invested with an external provider the HSC Scheme cannot guarantee your fund or the amount of the pension it will produce.
If you choose to opt-out of the HSC Scheme you will not be offered a HSC Stakeholder Pension.
HSC Stakeholder Pensions are run for the HSC by provider Standard Life. If you would like to find out more about HSC Stakeholder Pensions please ring the provider’s telephone helpline or write to them. They will send you a free information pack giving full details.
The Stakeholder Pension provider for the HSC Scheme is:
Standard Life
Stakeholder Pensions
Standard Life House
30 Lothian Road
Edinburgh EH1 OWT
www.standardlife.co.uk/nhs
Helpline: 0800 33 33 06You may, if you prefer, take out a Stakeholder Pension independently of the HSC Scheme.
1995 section
For members of the HSC Pension Scheme 1995 Section only.
Bigger lump sum purchase for Scheme membership before 25 March 1972.
This option applies to:-- Men who are or have been married, or have a civil partner or surviving nominated partner who they have nominated to receive a full dependants pension; or
- Women who are or have been married, or have a civil partner or surviving nominated partner who they have nominated to receive a full dependants pension.
You may not be entitled to the full lump sum retiring allowance because your pension based on membership before that date, only counts at one third of the value of later membership when your lump sum is worked out. If this applies to you, you will normally be able to buy the full lump sum retiring allowance for some or all of your membership before 25 March 1972.
But you cannot increase your lump sum if you rejoined the Scheme before age 50 following ill-health retirement. HSC Pension Service will tell you what an unreduced lump sum for Scheme membership before 25 March 1972 will cost.
Buying back previously refunded membership prior to 6 April 1978 only, or for any period that you were a general practitioner
If you had a refund for any membership before 6 April 1978, or for general practitioner membership at any time, you may be able to buy the membership back at half the normal cost. Your Employer will tell you more about the cost and payment options.
Payment arrangements – bigger lump sum and previously refunded membership
The most common payment method is the deduction of extra contributions from pay. There is a limit on those contributions and this may affect the number of years that can be bought:
- If the standard membership contribution is 5% of pensionable pay, the maximum additional contribution is 10% of pensionable pay.
- If the standard membership contribution is more than 5% of pensionable pay, the maximum additional contribution is 9% of pensionable pay.
You can begin to make payments from any future birthday, provided:
- your payments will run for at least 2 years, and
- you start to pay at least 2 years before your chosen end age, and
- you are not sick or absent without leave when you apply.
Payment can also be made by a single lump sum contribution but there are time limits for making an application. For a bigger lump sum:
- a married man must apply within 12 months of getting married, or if not then a member, within 12 months of first re-joining after getting married.
- For nominations to provide a full dependant’s pension, applications must be made within 12 months of making that nomination.
For previously refunded membership:
Application must be made in the first 12 months after re-joining the Scheme following a break in membership of 12 months or more.
If your extra payments change or stop
You will normally be expected to pay the extra contributions until age 60 or 65. If your payments change or stop before then, your additional benefits will normally be affected.
If you are under age 60 and before your chosen retirement age you:
- Die, or
- Have to retire because of ill-health, and
- On the date of death or the date you apply to retire because of ill-health you have paid the extra contributions for at least a year.
We will normally give you all the membership being purchased or bigger lump sum you were buying without further cost.
If you are age 60 or over and have chosen an end age of 65 and before that
end age you:- Die, or
- Have to retire because of ill-health, and
- On the date of death or the date you apply to retire because of ill-health you have paid the extra contributions for at least a year.
you will get the membership or bigger lump sum you have paid for up to that date, less a reduction because they are being paid before your chosen end age.
If at any age you die, or have to retire because of ill-health and you have paid the extra contributions for less than a year, your arrangement will be void and we will refund your additional contributions after deduction of tax.
If before your chosen end age:
- You leave the scheme for any reason, or
- We agree you can stop your additional contributions, or
- You have breaks in your membership, or
- Your payments stop for any reason,
you will get only the membership or bigger lump sum you have paid for at that stage.
We will also have to reduce the benefits you get from your membership or bigger lump sum, if they are paid before your chosen end age.
Applications
If you are interested in buying extra main Scheme benefits as described in this section, speak to your Employer.
Remember contracts to buy bigger lump sums and previously refunded membership MUST start from a future birthday.
If you have more than one HSC job you need only apply to your main employer, but you will need to inform other employers of the extra percentage contributions once confirmed so that they can also collect them. You should keep future new employers aware of your extra contributions to avoid getting into arrears.
If you are a general medical practitioner, contact the Business Services Organisation.
You can start paying from your next birthday provided your application has been received by then.
Important Notes:
Restored membership does not count when working out the minimum membership you need to qualify for benefits. If you leave the Scheme with less than 2 years ordinary membership you will still have to take a refund of your contributions, including any extra contributions you may have paid.
Restored membership is not taken into account when working out any membership enhancement for death, or ill-health retirement benefits. But is taken into account and may reduce any enhancement, in redundancy benefits.
If you work part time, the cost will be calculated using your part-time pensionable pay. The amount of additional benefits you get for your extra
contributions will be reduced to take account of this.For example, if you work half time and apply to buy 4 years previously refunded membership or bigger lump sum, based on your part time pay you will only pay half the extra contributions. You will then get 2, not 4 years of additional benefits. If the hours you work change, your contributions and the additional benefits you get will also change.
You may be able to increase your benefits through bigger lump sum and previously refunded membership arrangements as well as other methods described in this section. This is subject to overall HMRC and Scheme limits.
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ERRBO's (Early Retirement Reduction Buy Out)
An application for an ERRBO agreement should normally be made within three months of joining the 2015 Scheme for it to be effective from your first Scheme year. However the Department has agreed to permit any application for an ERRBO agreement, in the current financial year, to be applicable from 1 April 2015, subject to the necessary contributions being paid retrospectively. If you wish to avail of this opportunity please complete the ERRBO Expression of Interest form available in the ‘Forms’ tab above.
This section provides members of the 2015 Scheme with information about the facility for buying out the reduction that would apply if retirement benefits were claimed before Normal Pension Age (NPA). NPA in the 2015 Scheme is the same as the member’s State Pension Age (SPA) and may rise during membership of the Scheme if SPA rises.
Background
This Scheme has an NPA linked to your SPA which can rise if your SPA rises. An option exists in this Scheme only, for you to pay additional contributions to buy out the reduction that would apply if you retired before your NPA. This is known as an ‘ERRBO agreement’. Your employer can, if they agree, pay all or part of the required additional contributions on your
behalf.The agreement can be for early retirement 1, 2 or 3 years before your NPA but no earlier than age 65. An exception to this is where your NPA is not a whole number, for example if your NPA is 65 years and a number of months then an ERRBO agreement can be taken out to include the number of months.
The rate of additional contributions payable is based on your age at the effective date of the agreement (i.e. your age on 1 April of the first Scheme year to be covered by the agreement) and the number of years’ reduction being bought out. There is an overall limit on the total value of additional benefits that can be bought in this Scheme by the payment of
additional contributions. If you have bought or are buying Additional Pension (AP) this may limit the scope of the ERRBO agreement available.We will tell you if this applies if you make an application. The additional contributions are payable during each Scheme year (1 April of one year to 31 March of the following year) that the early retirement reduction is being bought out.
Examples
Member ‘A’ has an NPA (linked to SPA) of age 66. Member can buy an ERRBO agreement for 1 year and retire at age 65 with unreduced benefits.Member ‘B’ has an NPA (linked to SPA) of age 67. Member can buy an ERRBO agreement for 2 years and retire at age 65 with unreduced benefits, or buy an ERRBO agreement for 1 year and retire at age 66 with unreduced benefits.
Member ‘C’ has an NPA (linked to SPA) of age 68. Member can buy an ERRBO agreement for 3 years and retire at age 65 with unreduced benefits, or buy an ERRBO agreement for 2 years and retire at age 66 with unreduced benefits or buy an ERRBO agreement for 1 year and retire at age 67 with unreduced benefits.
Member ‘D’ has an NPA (linked to SPA) of age 66 years and 1 month. Member D can buy an ERRBO agreement for 1 year and 1 month and retire at age 65 with unreduced benefits, or buy an ERRBO agreement for 1 month and retire at age 66 with unreduced benefits.
In all of the above examples the additional contributions must be paid for each Scheme year for it to be included in the ERRBO agreement.
When can I apply?
An application for an ERRBO agreement usually must be made within three months of joining the 2015 Scheme for it to be effective from your first Scheme year. However the Department has agreed to permit any application for an ERRBO agreement, in the current financial year, to be applicable from 1 April 2015, subject to the necessary contributions being paid retrospectively. Once an agreement is in place it will automatically roll forward to subsequent Scheme years until ended.It is not permissible to make retrospective applications for earlier Scheme years.
Example
A member joins this Scheme on 1 April 2015. Provided an application is received by 30 June 2015 the ERRBO agreement will be effective from the beginning of the 2015/2016 Scheme year (1 April 2015) and arrears of additional contributions will be collected by the employer. An application
received at a later date will be effective from the beginning of the next Scheme year (2016/2017) and additional contributions will be collected by the employer from April 2016. Only Scheme years 2016/2017 and later will be covered by the ERRBO agreement and the pension built up in year 2015/2016 will be reduced for being paid early and for longer.How much will it cost?
How much an ERRBO agreement will cost depends on your age in complete years at the day before the effective date of the agreement and the number of years’ reduction the agreement is for. The table below gives the rate of extra percentage contributions payable each year in addition to your normal tiered contributions, to secure the agreement. Where the agreement is for or includes a number of months, the cost will be pro rata the percentage rate shown in the table for a 1 year reduction buy out.Additional contribution rate (% of pay) Age (Complete year at previous 31st March) NPA – 1 NPA – 2 NPA -3 16 1.27% 2.54% 3.81% 17 1.27% 2.54% 3.81% 18 1.28% 2.56% 3.84% 19 1.28% 2.56% 3.84% 20 1.28% 2.56% 3.84% 21 1.29% 2.58% 3.87% 22 1.29% 2.58% 3.87% 23 1.30% 2.60% 3.90% 24 1.30% 2.60% 3.90% 25 1.30% 2.60% 3.90% 26 1.31% 2.62% 3.93% 27 1.31% 2.62% 3.93% 28 1.32% 2.64% 3.96% 29 1.32% 2.64% 3.96% 30 1.33% 2.66% 3.99% 31 1.33% 2.66% 3.99% 32 1.34% 2.68% 4.02% 33 1.34% 2.68% 4.02% 34 1.35% 2.70% 4.05% 35 1.35% 2.70% 4.05% 36 1.36% 2.72% 4.08% 37 1.36% 2.72% 4.08% 38 1.37% 2.74% 4.11% 39 1.37% 2.74% 4.11% 40 1.38% 2.76% 4.14% 41 1.39% 2.78% 4.17% 42 1.39% 2.78% 4.17% 43 1.40% 2.80% 4.20% 44 1.41% 2.82% 4.23% 45 1.41% 2.82% 4.23% 46 1.42% 2.84% 4.26% 47 1.43% 2.86% 4.29% 48 1.44% 2.88% 4.32% 49 1.44% 2.88% 4.32% 50 1.45% 2.90% 4.35% 51 1.46% 2.92% 4.38% 52 1.47% 2.94% 4.41% 53 1.49% 2.98% 4.47% 54 1.50% 3.00% 4.50% 55 1.51% 3.02% 4.53% 56 1.52% 3.04% 4.56% 57 1.54% 3.08% 4.62% 58 1.55% 3.10% 4.65% 59 1.57% 3.14% 4.71% 60 1.58% 3.16% 4.74% 61 1.60% 3.20% 4.80% 62 1.62% 3.24% 4.86% 63 1.64% 3.28% 4.92% 64 1.66% 3.32% 4.98% 65 1.69% 3.38% 66 1.69% 67 Example
A member has an NPA of age 68 and takes out an agreement to purchase a buy-out of three years immediately on joining the 2015 Scheme at age 35. Additional contributions are paid up to their 65th birthday when they retire and claim their pension. The normal actuarial reduction that would apply to the pension being paid 3 years early is eliminated by the buy-out and the pension is paid in full. The member will have paid additional contributions of 3.60%, before tax relief, in addition to their normal tiered rate contributions for 30 years to be entitled to claim their entire 2015 Scheme benefits without reduction at age 65 i.e. 3 years earlier than NPA.How do I apply?
You can download an expression of interest form from our website in the above ‘forms’ tab.Use this form to enquire about your eligibility to enter into an ERRBO agreement and seek confirmation of the rate of additional contributions that you would pay if an ERRBO agreement is possible. If you then wish to proceed you will need to sign and return the agreement document sent to you by NHS Pensions. Your employer will then be instructed to deduct the additional contributions from the effective date.
Changes in your plans or circumstances after an ERRBO agreement has started
Below is a series of questions and answers to explain the impact of any change in your plans or circumstances after an ERRBO agreement has started.
Q1. What happens if I have to retire before my ERRBO retirement age due to permanent Ill health?
A1. The ERRBO agreement will have no value and you will not have your additional contributions returned. You will, however, receive your pension early and without reduction.Q2. Can I decide to stop and later restart paying ERRBO additional contributions?
A2. Not routinely. However an ERRBO agreement can be suspended on hardship grounds only for up to one year. If the additional contributions are not restarted within one year the agreement is terminated and you cannot subsequently take out a further agreement. We will tell you when you must restart paying additional contributions to avoid termination of the agreement.Q3. Can I terminate the agreement before reaching my ERRBO retirement age?
A3. Yes you can terminate the agreement at any time. If the period during which additional contributions are paid is less than one year then the additional contributions will be repaid and the agreement cancelled. If the period during which additional contributions have been paid is one year or more, then additional contributions paid during any part Scheme year will be repaid and the buyout period is limited to the end of the previous Scheme year.Q4. What happens if I decide to retire before reaching my ERRBO
retirement age?
A4. Your pension benefits would be reduced for being paid earlier and
longer after taking account of the ERRBO agreement. For example, a member with an NPA of age 66 who purchased an ERRBO agreement of 1 year decides to retire at age 64. After taking account of the ERRBO, the retirement age is one year earlier than the effective NPA and the pension would be reduced by the appropriate factor for early retirement at (NPA -1).Q5. What happens if I decide to retire later than my ERRBO retirement age?
A5. If you take your pension later than the date when an ERRBO agreement would completely eliminate the early retirement reduction, you must continue to pay the ERRBO contributions until you retire or reach your NPA. The pension built up in the period of the agreement will be increased because it is paid later than your reduced retirement age. -
Additional Pension (AP)
AP is a flexible way of increasing your Scheme pension. It allows you to choose to buy extra annual pension and see clearly how much the purchase will cost. Under this option you elect to buy a set amount of annual pension for an agreed amount of
contributions that you can choose to pay either as a lump sum or as a regular payment for an agreed period of time.AP is paid at the same time as your main Scheme pension. If it is paid before your
normal pension age it will be reduced to take account of its early payment. AP can be bought at any time during the year as either:- personal cover which increases your own pension benefits only.
- dependants cover, which increases your own pension and the benefits
that will be payable to your spouse, partner or dependent children after
your death.
AP does not include an automatic lump sum but you can include your AP in the total pension that is given up, or commuted, to provide a bigger lump sum.
Irrespective of your working pattern you will get the same amount of AP at retirement and the cost of purchasing AP is the same whether you work full-time or part-time.
How much can I buy?
Section Maximum Purchase Amount Minimum Purchase Amount (units of) Dependants Cover (per £250) Partner Child 1995 Section £5,000 £250 £125 £62.50 2008 Section £5,000 £250 £93.75 £46.88 2015 CARE Scheme £6,000 £250 £84.38 £42.19 AP purchased is increased in line with monthly increases in the rate of inflation both before the AP comes into payment (‘a pre-payment increase’) and also whilst it is being paid (‘an in-payment increase’). If the application to buy AP was made:
- On or before 31 March 2011 – it will attract pre-payment increases in line with the Retail Prices Index (RPI) and in-payment increases in line with Consumer Prices Index (CPI).
- On or after 1 April 2011 – both the pre-payment and the in-payment increases will be in line with the CPI.
Can everyone apply to buy AP?
Yes, provided that you are a contributing member of the Scheme, in good health and not absent from work for any reason. You can make any number of AP purchases throughout your Scheme membership before reaching your normal pension age. You must also complete the purchase before your normal pension age.
In some circumstances your employer may wish to buy some AP for you. They would do this by making a single payment on your behalf.
How much does it cost?
The cost of AP is determined by factors provided by the Scheme Actuary. It can be paid for either by a single lump sum or by instalments from your pay, over a complete number of years of your choice, up to a maximum of 20 years.
Will I pay the same amount every month?
Usually yes. Purchase by instalments is however subject to review based on advice from the Scheme Actuary, and following review the cost of future instalments of an existing arrangement could be changed. Actuarial reviews of the Scheme take place every four years.
If the cost of future instalments increases as a result of a review you will have the option to end your purchase. You would then be credited with the proportion of AP that you had paid for.
What if I have short breaks in my HSC employment?
If you have breaks in HSC employment of less than 12 months e.g. between changing jobs with another HSC employer, you will be given the opportunity to continue your agreement. You will need to make up any missing instalments; if this happens tell your new employer about your AP purchase and make arrangements to pay the outstanding instalments.
What if I stop paying my instalments?
If you stop paying instalments within the first 12 months because you die or retire on ill-health grounds, the agreement will be cancelled and your additional contributions will be returned.
If you stop paying instalments after 12 months because you die or retire on ill-health grounds, you will be credited with the AP amount and all future additional contributions will be waived. If you die, this will only have effect if you have taken AP with dependants cover.
If you stop paying instalments for any other reason, the AP agreement will be terminated and you will be credited with the proportion of the AP that you have paid for.
How do I apply?
If you are interested in purchasing AP you should complete the preliminary application to purchase additional pension. The AP1 form if you are a protected member of the 1995 or 2008 scheme and the AP1-CARE if you are a member of the 2015 CARE Scheme which you can find here. The form should be forwarded to the HSC Pension Service.
Once you have decided to proceed, the election to purchase additional pension form must be completed and forwarded to the HSC Pension Service the AP2 form for a protected member and AP2-CARE for a member of the 2015 CARE Scheme.
You may be able to increase your benefits through the AP arrangement as well as other methods described in this section. This is subject to overall HMRC and Scheme limits.
Contact Details:
HSC Pension Service
Waterside House,
75 Duke Street,
Londonderry
BT47 6FP
Tel: 02871 319111
Email: hscpensions@hscni.net -
Money Purchase Additional Voluntary Contributions
Introduction:
A Money Purchase AVC (MPAVC) is an arrangement for making additional contributions to build up a separate retirement fund. The contributions are invested and then used to buy an extra pension either at retirement, or later. A MPAVC will not increase the benefits paid from the main HSC Pension Scheme.
Separate contributions can also be paid to increase the lump sum dependants will receive from the main Scheme when a member dies before retirement.
A Money Purchase ‘Group’ AVC is available through the HSC Pension Scheme. MPAVC arrangements are also available on a ‘Free-standing’ basis.
NHS MPAVC Providers
The HSC Money Purchase AVC arrangements are part of the Scheme but run on our behalf by a chosen provider. They are available to members of the main HSC Pension Scheme and our chosen providers are:
Standard Life
Group Pensions Public Section
Standard Life House
30 Lothian Road
Edinburgh
EH1 0WTInvestment Funds
The HSC AVC provider offers a range of different investment funds. Contributions can be made to one or more of the available funds and can also be switched between funds. Investment returns help the fund to grow but many funds are linked to share prices so the value can rise and fall as stock markets and share values change.
Because the additional contributions are invested with an external provider, the HSC Pension Scheme cannot guarantee the value of the fund or the amount of the pension it will produce. Once in payment, the Scheme will guarantee payment of any pension received through HSC arrangements.
We have negotiated special HSC terms for these arrangements, which are reviewed regularly and there are no commission charges.
There is no set cost, so individuals can choose how much they would like to contribute and can usually change or stop their payments. Contributions are taken from pay and sent direct to the AVC provider. Lump Sum contributions can also be made at any time.
HM Revenue and Customs (HMRC) allow tax relief on pension contributions up to 100% of relevant UK earnings for the tax year.
Benefits
Benefits may be taken at the same time as the main scheme benefits or deferred to a later date. They must however be taken before reaching age 75.
There is a choice of two benefit options:
- Up to 25% of the AVC fund can be taken as a tax-free lump sum and the rest must be used to buy an extra pension; or
- All of the AVC fund must be used to buy an extra pension.
A lump sum taken from the AVC fund is in addition to any main Scheme lump sum.
Free-standing providers
These are Money Purchase arrangements that are not connected to the NHS Scheme in any way. Available from banks and insurance companies, they work in much the same way as the HSC Money Purchase AVCs.
When considering a Free-Standing arrangement, it is worth remembering that commission may be deducted from the contributions before they are invested and there are no special HSC terms. The HSC Scheme cannot guarantee payment of a pension received through a free-standing arrangement.
Anyone interested in this type of arrangement should seek independent financial advice and then contact the bank or insurance company of their choice.