Understanding the NHS Pension Scheme: What Every Doctor Needs to Know in 2025

The NHS Pension Scheme is one of the most generous public sector pension schemes in the UK—but it’s also one of the most complex. For doctors, especially those juggling NHS and private work, understanding how it works is vital for effective financial planning.

With ongoing reforms, the 2015 scheme, the McCloud Remedy, and lifetime and annual allowance changes in recent budgets, now is the time to get clear on your NHS pension position.

In this in-depth guide, we explain what every doctor needs to know about the NHS Pension Scheme in 2025: how it works, recent changes, planning considerations, and how Rise Wealth can help you make sense of it all.

What Is the NHS Pension Scheme?

The NHS Pension Scheme is a defined benefit pension scheme, meaning it provides a guaranteed income for life in retirement based on your earnings and length of service.

There are three main NHS pension schemes that a doctor might be part of:

• 1995 Section (final salary scheme)

• 2008 Section (final salary scheme)

• 2015 Scheme (career average revalued earnings, or CARE)

From 1 April 2022, all active NHS pension members were moved into the 2015 Scheme as part of the transition following the McCloud judgment.

Quick Overview of Each Scheme

🩺 1995 Section (Now Closed to New Accrual)

• Final salary based on the best year’s earnings in the last three years

• Normal Pension Age (NPA): 60

• Automatic lump sum of 3x pension

• Pension is based on: (Final Salary × Pensionable Service) ÷ 80

  
  

🩺 2008 Section (Now Closed to New Accrual)

• Final salary based on the best three consecutive years in the last 10

• NPA: 65

• Option to convert part of pension into a lump sum

• Pension formula: (Final Salary × Pensionable Service) ÷ 60

  
  

🩺 2015 Scheme (Now the Active Scheme for All)

• Career average scheme

• Pension accrual rate: 1/54 of pensionable earnings per year

• Earnings revalued annually with CPI + 1.5%

• NPA linked to state pension age (66–68+)

What Is the McCloud Remedy?

The McCloud Remedy corrects age discrimination that occurred when the 2015 scheme was introduced. At the time, older members were allowed to remain in the 1995 or 2008 schemes while younger members were moved into the 2015 Scheme.

As of 2025, affected doctors will receive a choice of which pension benefits to take for the period 1 April 2015 to 31 March 2022—either from their legacy scheme (1995/2008) or the reformed 2015 Scheme. This is called the "Deferred Choice Underpin" (DCU).

What Doctors Need to Do:

• No action is required yet—NHS Pensions will write to affected members in due course.

• At retirement, you'll be asked to choose which benefits to take for the remedy period.

• It’s crucial to take advice, as this could significantly impact retirement income, lump sums, and tax exposure.

Key Benefits of the NHS Pension Scheme for Doctors

• Inflation-protected income for life

• Spouse and dependent pensions

• Ill-health retirement benefits

• Death-in-service cover

• Tax-free lump sum (automatic or optional)

  
  

For many doctors, the scheme forms the bedrock of their retirement plan, but understanding how to maximise those benefits requires careful attention.

Annual Allowance and Lifetime Allowance Changes (2025 Update)

Pension tax rules have historically posed problems for higher-earning NHS staff. Here’s what’s new:

✅ Lifetime Allowance (LTA) Abolished

As of 6 April 2024, the Lifetime Allowance was abolished. There is no longer a cap on the total value of pension benefits you can build tax-free.

However:

• Tax-free lump sums remain capped at the old LTA level (£268,275 or 25% of £1,073,100), unless protected.

• Retirement planning must still account for income tax on pension withdrawals.

  
  

⚠️ Annual Allowance (AA) Still Applies

The Annual Allowance restricts the amount of pension you can accrue in a year without tax charges.

• Standard AA in 2025/26: £60,000

• Tapered AA may reduce this for high earners down to £10,000

• AA applies to "pension input amount", which is calculated using a complex formula in defined benefit schemes like the NHS Pension.

  
  

Exceeding the AA can lead to tax charges, and many doctors are unaware until HMRC contacts them. An IFA can help model potential growth and pre-empt issues.

Planning Tips for Doctors in the NHS Pension Scheme

1. Understand Your Scheme Membership

Request a pension statement to see:

• Which sections you’ve been in

• Pensionable service

• Accrued benefits to date

• Estimated benefits at retirement

  
  

2. Watch Out for the Annual Allowance Trap

High-earning consultants and GPs often exceed the AA due to:

• Promotions

• Additional sessions

• CPI uplifts on previous pension pots

  
  

Mitigation strategies include:

• Opting out of the scheme temporarily

• Using Scheme Pays to cover AA charges

• Making alternative private pension contributions

  
  

3. Factor in the McCloud Remedy

Your choice at retirement could impact:

• How much lump sum you receive

• When you can retire

• Whether you incur a tax charge Understanding the difference between your 1995 and 2015 benefits is essential.

  
  

4. Consider Early or Phased Retirement

The 2015 Scheme offers more flexible retirement options:

• Partial retirement while still working

• Taking some benefits early

• Mixing NHS and private income streams

  
  

Plan ahead to ensure your income matches your lifestyle goals.

5. Include Your NHS Pension in Your Estate and Protection Plan

• Death in service benefits can be significant—ensure nominations are up to date.

• Spouse and dependents’ benefits are valuable but often misunderstood.

• Combine your NHS pension strategy with personal protection and estate planning.

What If You're a GP or Have Private Practice Income?

NHS pensions for GPs are calculated differently, based on total pensionable earnings submitted via Type 1 forms annually. It’s crucial that records are accurate.

For those with private earnings:

• These are not included in NHS pension calculations

• Consider private pensions (e.g. SIPP or SSAS) to supplement retirement income

• Ensure you're not breaching AA across both NHS and private pensions

Frequently Asked Questions

Can I take my NHS pension and keep working?

Yes. Under the 2015 Scheme’s retire and rejoin rules, you can take your pension and return to NHS work (subject to conditions). No abatement applies post-2023.

Should I opt out of the NHS pension?

In most cases, no—the scheme is highly valuable. However, some high earners may benefit from partial opt-out strategies. Always seek independent advice first.

Is my NHS pension affected by inflation?

Yes. NHS pensions are index-linked, meaning they rise with CPI inflation both before and after retirement, helping maintain real value.

How Rise Wealth Helps Doctors Navigate Their NHS Pension

At Rise Wealth, we specialise in financial planning for doctors, including those working in the NHS, private practice, or both.

We help clients:

• Interpret NHS pension statements

• Model income at retirement (across multiple schemes)

• Avoid unexpected tax charges

• Plan around the McCloud remedy and new pension rules

• Coordinate NHS and private pensions into one holistic plan

Ready to Take Control of Your NHS Pension?

Don’t leave your pension planning to chance. The decisions you make today will shape your retirement for decades.

📞 Book a free NHS pension consultation with a Rise Wealth adviser

🧠 Get clarity, not confusion

🌍 Based in Harrogate – helping doctors UK-wide

Let us help you protect your future—and retire on your terms.