The National Health Service Pension Scheme Regulations 1995

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Meaning of “pensionable pay" and “final year’s pensionable pay"E+W+S

C1.—[F1(1) In these Regulations, “pensionable pay” means, subject to the provisions of this regulation—

(a)all salary, wages, fees and other regular payments made to a member in respect of pensionable employment as an officer, but does not include bonuses, [F2pay awards and pay increases that are expressed by the Secretary of State to be non-consolidated,] payments made to cover expenses or payments for overtime;

(b)pensionable earnings calculated in accordance with paragraph 3, or as the case may be, paragraph 4 of Schedule 2 in the case of a non-GP provider who does not receive any of the payments referred to above in respect of his pensionable employment as an officer by virtue of the application of these Regulations to him as if he were such an officer under regulation R1.]

[F3(1A) Paragraphs (2) to (4) and (5) to (7) apply in respect of pensionable employment before 1st April 2008.]

(2) Subject to paragraph (3), any amount by which a member’s pensionable pay exceeds the permitted maximum will be ignored when calculating the amount of any contributions or benefits payable under these Regulations.

[F4(3) In the case of a member who—

(a)joined [F5this Section of] the scheme before 1st June 1989 and has a break in pensionable employment on or after that date—

(i)any pensionable pay earned preceding the break in that employment in excess of the permitted maximum will not be ignored;

(ii)any pensionable pay earned after the break in that employment in excess of the permitted maximum will be ignored;

(b)joined [F5this Section of] the scheme before 1st June 1989 and to whom sub-paragraph (a) does not apply, pensionable pay in excess of the permitted maximum will not be ignored.]

[F6(3A) Where a member who was eligible to be a member before 1st June 1989 joins [F5this Section of] the scheme on or after that date by virtue of being a person to whom regulation B5 applies, any amount by which that member’s pensionable pay exceeds the permitted maximum will not be ignored when calculating the amount of any contributions or benefits payable under these Regulations except in relation to a period following a break in pensionable employment on or after that date.]

(4) For the purposes of [F7paragraphs (3) and (3A)], no account shall be taken of a break in pensionable employment if—

(a)the member returns to pensionable employment within 12 months after leaving;

(b)the break is due to the member’s secondment or posting to another employer and, at the time of the secondment or posting, the member has a definite expectation of returning to pensionable employment when the period of secondment or posting ends;

(c)the break is due to the member being engaged in other employment which is approved for this purpose by the Secretary of State;

(d)the break is due to the member’s unpaid absence from work and the member returns to pensionable employment within one month after returning to work; or

(e)the break corresponds to the member’s absence from work wholly or partly because of pregnancy or confinement and the member returns to work after the break in exercise of her right under Section 39(1) of the Employment Protection (Consolidation) Act 1978 M1 and returns to pensionable employment no later than one month after returning to work;

[F8(f)the break is due to the member opting out of [F5this Section of] the scheme as the result of a contravention which is actionable under section 62 of the Financial Services Act 1986 [F9or section 150 of the Financial Services and Markets Act 2000].]

[F10(4A) Paragraphs (4B) to (7) apply in respect of pensionable employment on, or after, 1st April 2008.

(4B) Subject to paragraph (4C), pensionable pay in excess of the permitted maximum will not be ignored.

(4C) Pensionable pay in excess of the permitted maximum will be ignored in respect of additional service being bought under regulation Q1 and an unreduced lump sum being brought under regulation Q2 if—

(a)the member elected to make such a purchase under regulation Q6(3) from a birthday falling before 1st April 2008; and

(b)the member’s pensionable pay was restricted under paragraph (2) of this regulation before that date; or

(c)the member’s pensionable pay would have been restricted under that paragraph if it had exceeded the permitted maximum.]

(5) This regulation applies to a member in respect of whom a transfer payment has been accepted from a health service scheme in the same way as if the period of employment that qualified the member for benefits under the health service scheme had been pensionable employment.

(6) [F11Subject to [F12paragraphs (6A) and (6B)], in these] Regulations, “final year’s pensionable pay" means pensionable pay in respect of the member’s last year of pensionable employment, ending on the date the member ceases to be in such employment, or dies, whichever occurs first, except—

(a)if pensionable pay was greater in either or both of the 2 consecutive years immediately preceding the last year, “final year’s pensionable pay" means pensionable pay in respect of the year immediately preceding the last year or, if greater, pensionable pay in respect of the first of those 2 consecutive years; and

(b)if the member was in pensionable employment for less than 12 months, “final year’s pensionable pay" means—

[F13(6A) If the pensionable pay of a member credited with a period of pensionable service under regulation N2 (transfers made under the Public Sector Transfer Arrangements) or regulation N4 (special terms for transfers in (bulk transfers etc)) has exceeded the permitted maximum and either—

(a)paragraph 20 of Schedule 6 to the Finance Act 1989 applied to the member without the modification made by regulation 5 of the Retirement Benefits Schemes (Continuation of Rights of Members of Approved Schemes) Regulations 1990 in respect of benefits derived from all or part of that service under another scheme; or

(b)any equivalent scheme provision applied to the member in respect of all or part of that service when that person was a member of the scheme from which the transfer was accepted,

that excess shall be ignored for the purposes of calculating the final year’s pensionable pay under paragraph (6) in respect of the corresponding period of pensionable service credited under regulation N2 or N4.]

[F14(6B) If a member becomes entitled to a pension under regulation E5A (partial retirement pension), “final year’s pensionable pay” means pensionable pay in respect of the year immediately preceding the day on which the reduction in the member’s pensionable pay takes effect by virtue of which the member becomes entitled to the partial retirement pension.]

[F15(7) In this regulation, “permitted maximum” means—

(a)in relation to any tax year before the tax year 2006-07, the figure specified for that tax year in an order made under section 590C of the Income and Corporation Taxes Act 1988; or

(b)subject to paragraphs (8) and (9), the figure for any later year is £108,600.

(8) If the retail prices index for the month of September preceding the tax year 2007-08 or any later tax year is higher than it was for the previous September, the figure for that year shall be an amount arrived at by—

(a)increasing the figure for the previous tax year by the same percentage as the percentage increase in the retail prices index; and

(b)if the result is not a multiple of £600, rounding it up to the nearest amount which is such a multiple.

(9) If the retail prices index for the month of September preceding the tax year 2007-08 or the month of September preceding any later tax year is not higher than it was for the previous September, the figure for that year shall be the same as for the previous tax year.]

[F16(10) Where, having regard to the matters referred to in paragraph (11), the Secretary of Secretary of State considers that the amount which would, but for the Secretary of State’s determination under this paragraph, constitute the member’s final year’s pensionable pay is inordinate, determine—

(a)what the amount of that pensionable pay is to be, and

(b)the date from which any change in the amount of that pay as a result of that determination is to take effect.

(11) Those matters are—

(a)any variations in the level of the member’s pensionable pay during a period not exceeding ten years and ending with the earlier of the date the member ceases to be in pensionable employment or the date the member dies;

(b)the general level of pensionable pay pertaining in NHS employment for members of the same or an equivalent grade or post during the period under consideration for the purposes of paragraph (a);

(c)promotion and re-grading prospects in NHS employment for members of the same or an equivalent grade or post during the period under consideration for the purposes of paragraph (a);

(d)any other matters the Secretary of State considers relevant.

(12) Where the Secretary of State determines the amount of a member’s final year’s pensionable pay pursuant to paragraph (10)—

(a)the difference between the amount which would, but for that determination, be the member’s final year’s pensionable pay and the amount so determined shall be ignored for the purposes of this regulation (“the ignored amount”);

(b)any contributions referable to the ignored amount and paid by the member pursuant to regulation D1 or Q6, paragraph 10 or 23 of Schedule 2 or Schedule 2B, must, net of any tax payable, be refunded to that member;

(c)any contributions referable to the ignored amount and paid by the employing authority pursuant to regulation D2 or paragraph 10 or 23 of Schedule 2, or Schedule 2B, must be refunded to that employing authority;

(d)the amount so determined is not to be regarded as an “excessive pay increase” for the purposes of regulation D3.]

[F17(13) Paragraphs (14) to (20) apply to a member who has remediable service within the meaning of section 1 of the Public Service Pensions and Judicial Offices Act 2022 that is pensionable service under this Section of the scheme by virtue of section 2(1) of that Act (remediable service treated as pensionable under Chapter 1 legacy schemes) and whose pensionable pay and pensionable service under this Section of the scheme is derived from contributions made to the 2015 Scheme in the relevant scheme years in respect of that remediable service, if—

(a)at any time during that period of service, the terms of the member’s employment contract required the member to work less than whole-time, according to those terms, for any period of time; and

(b)the member received a relevant payment.

(14) The member, or if the member is deceased, the member’s personal representatives, may elect for all relevant payments to be included as pensionable pay for the purposes of this regulation, and for service in respect of that pensionable pay to be included in the member’s pensionable service for the purposes of regulation C2.

(15) The member’s employing authority must, before 1st January 2026, or in exceptional circumstances such later time as the scheme manager decides, send a notice in writing to the member, or as the case may be, the member’s personal representatives, that they may make an election under paragraph (14).

(16) The notice referred to in paragraph (15) must specify the amount of contributions the member and the member’s employing authority will be required to pay, and the amount of pensionable pay and pensionable service the member will be entitled to in respect of those contributions, if the member or as the case may be, the member’s personal representatives, makes an election under paragraph (14).

(17) An election under paragraph (14) must be—

(a)made—

(i)by the member, or as the case may be, the member’s personal representatives, in writing, in such form and including such information as the member’s employing authority requires; and

(ii)in respect of all relevant payments received by the member; and

(b)received by the member’s employing authority before—

(i)the end of the period of three months beginning with the day on which the member is provided with the notice under paragraph (15); or

(ii)such a later date before 1st July 2026 as the member’s employing authority considers reasonable in all the circumstances.

(18) For the purposes of this regulation, a relevant payment means so much of a payment of salary, wages, fees or other regular payment made to a member by the employing authority—

(a)in respect of any period of time worked by the member in excess of the work required by the terms of their employment contract described in paragraph (13)(a) up to the whole-time equivalent according to the terms of the member’s employment contract during a scheme year falling within the period of the member’s remediable service; and

(b)that was treated by the member’s employing authority as a payment for overtime for the purposes of regulation 27 of the 2015 Scheme.

(19) Where a member, or as the case may be, the member’s personal representatives, has made an election under paragraph (14), that member will be treated as if they had also made an election under regulation 27A(2) of the 2015 Scheme (election for relevant payments to be included as pensionable earnings).

(20) If a member, or as the case may be, the member’s personal representatives, does not make an election under paragraph (14), all relevant payments made to that member will be treated as payments for overtime for the purposes of this regulation.]

Textual Amendments

F1Reg. C1(1) substituted (with effect from 1.4.2004) by The National Health Service (Pension Scheme and Injury Benefits) Amendment Regulations 2005 (S.I. 2005/661), regs. 1(1), 5

F2Words in reg. C1(1)(a) inserted (with effect from 1.4.2014) by The National Health Service Pension Scheme, Injury Benefits and Additional Voluntary Contributions (Amendment) Regulations 2015 (S.I. 2015/96), regs. 1(2)(3), 4

F3Reg. C1(1A) inserted (1.4.2008) by The National Health Service Pension Scheme (Amendment) Regulations 2008 (S.I. 2008/654), regs. 1(2), 5(2)

F4Reg. C1(3) substituted (with effect from 1.4.2003) by The National Health Service Pension Scheme (Amendment) Regulations 2003 (S.I. 2003/2322), regs. 1(1)(2)(b), 2(2)

F5Words in reg. C1 inserted (1.10.2009) by The National Health Service Pension Scheme, Injury Benefits and Additional Voluntary Contributions (Amendment) Regulations 2009 (S.I. 2009/2446), reg. 1(2), Sch. 1 para. 1

F6Reg. C1(3A) inserted (12.2.1997) by The National Health Service Pension Scheme and Provision of Information and Administrative Expenses etc. (Amendment) Regulations 1997 (S.I. 1997/80), regs. 1, 4(1)

F7Words in reg. C1(4) substituted (12.2.1997) by The National Health Service Pension Scheme and Provision of Information and Administrative Expenses etc. (Amendment) Regulations 1997 (S.I. 1997/80), regs. 1, 4(2)(a)

F8Reg. C1(4)(f) added (12.2.1997) by The National Health Service Pension Scheme and Provision of Information and Administrative Expenses etc. (Amendment) Regulations 1997 (S.I. 1997/80), regs. 1, 4(2)(b)

F9Words in reg. C1(4)(f) inserted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649), arts. 1, 483(3)

F10Reg. C1(4A)-(4C) inserted (1.4.2008) by The National Health Service Pension Scheme (Amendment) Regulations 2008 (S.I. 2008/654), regs. 1(2), 5(3)

F11Words in reg. C1(6) substituted (1.4.2008) by The National Health Service Pension Scheme (Amendment) Regulations 2008 (S.I. 2008/654), regs. 1(2), 5(4)