Leaving the NHS — what happens to your pension?
You do not lose your NHS pension when you leave. The benefits you have built up are preserved as a deferred pension, revalued by CPI until you can draw them. Here is how it works, and what the transfer question actually involves.
- ▸You must have two years of qualifying NHS pension membership for your benefits to be preserved as a deferred pension.
- ▸A deferred NHS pension is revalued by CPI each year (plus 1.5% for 2015 Scheme benefits) until you draw it.
- ▸You can access a deferred NHS pension from age 55 (rising to 57 from 2028), subject to actuarial reduction if before normal pension age.
- ▸Transferring a deferred NHS pension to a DC scheme is legally possible but almost always gives up more value than it creates.
The two-year vesting period
Not every NHS employee who leaves is entitled to a preserved pension. To qualify, you must have at least two years of qualifying membership in the NHS Pension Scheme.
If you leave with fewer than two years of membership, you are entitled to a refund of your own contributions (minus a 20% tax deduction representing the basic rate tax relief you received when the contributions went in). The employer's contributions are not returned — they stay in the scheme.
A contribution refund is a clean break, but it means you have no pension entitlement from that period of service. The NHS Pension Scheme does not allow you to simply "keep" a small deferred pension below the two-year threshold.
If you have just over two years of service, a deferred pension is preserved. This is true regardless of how small the accrued amount is. A deferred NHS pension — even a modest one — is a guaranteed inflation-linked income for life, and it will revalue until you draw it.
Deferred pension: how it revalues
Once your benefits are deferred, NHS Pensions does not simply freeze the value. The pension revalues each year so it does not lose its purchasing power against inflation.
2015 Scheme benefits: Revalued annually by CPI + 1.5% during deferral. This is the same revaluation rate applied during active membership. At retirement, the pension includes the cumulative effect of all these annual uplifts.
1995 and 2008 Section benefits: Revalued annually in line with Pensions Increase, which tracks the September CPI figure. This is slightly different to active membership revaluation, but the practical effect — protection against inflation — is the same.
The revaluation is applied on 1 April each year. If CPI is 4% and you hold 2015 Scheme deferred benefits, your pension slice grows by 5.5% (CPI 4% + 1.5%) on 1 April.
Over a long deferral period, this compounds significantly. A 35-year-old who leaves the NHS with a deferred pension of £5,000 per year and does not draw it until 67 will receive substantially more than £5,000 per year in nominal terms by the time they retire — the CPI uplift will have accumulated for 32 years.
- ▸The minimum qualifying period for a deferred NHS pension is two years of scheme membership. [NHS Pensions]
- ▸Deferred 2015 Scheme benefits are revalued by CPI + 1.5% each year. Legacy section benefits are revalued by Pensions Increase (CPI). [NHS Pensions]
When you can access a deferred NHS pension
A deferred pension can be drawn from age 55 (rising to 57 from 6 April 2028). However, drawing before normal pension age triggers an actuarial reduction.
The normal pension ages are:
- 1995 Section deferred benefits: age 60
- 2008 Section deferred benefits: age 65
- 2015 Scheme deferred benefits: state pension age (currently 67)
If you draw a deferred pension before normal pension age, the same actuarial reduction factors apply as for active members taking early retirement — approximately 3–5% per year before NPA, depending on the section.
You do not need to be employed or working to draw a deferred NHS pension. Once you reach the relevant age (and make the application), NHS Pensions will put the pension into payment.
To apply, contact NHS Pensions at least three months before your intended retirement date. Payments are made monthly.
Transferring out vs leaving deferred
When you leave the NHS, you have a choice: leave the pension deferred (default) or transfer the cash equivalent transfer value (CETV) to another scheme.
Transferring out means NHS Pensions calculates the present value of your future pension benefits and pays that as a lump sum into a defined contribution pension (a personal pension or the new employer's scheme, if it accepts DB transfers).
The problem with transferring out:
A deferred NHS pension is a guaranteed, inflation-linked income for life. Transferring it to a DC pension means:
- You take on all investment risk (the pot can fall in value)
- You take on longevity risk (if you live to 100, the pot may run out)
- You lose the inflation protection embedded in the NHS pension
CETVs are calculated on a basis that often understates the pension's true value compared to what it would cost to replicate on the open market. The annuity rate implied by a typical NHS CETV is often better than anything available commercially — meaning you are giving up a good deal to receive a transfer value priced as though it were an average deal.
Legal requirement: Any NHS pension transfer over £30,000 requires regulated financial advice from an FCA-authorised financial adviser before it can proceed. This is a legal requirement under the Pension Schemes Act 2015. The adviser must provide a formal transfer analysis, and the vast majority of professional advisers will recommend against transferring out of a DB scheme.
For a projection of what your deferred NHS pension might be worth at different retirement ages, use the NHS Pension Calculator. For broader context, the public sector pensions guide covers the DB versus DC comparison in detail.
Returning to NHS employment
If you leave the NHS, defer your pension, and subsequently return to NHS employment, your deferred benefits and new pension accrual are generally kept separate.
On returning to NHS employment, you will normally re-join the 2015 Scheme and begin accruing new benefits from the re-joining date. Your deferred benefits from the earlier period of service continue to revalue separately and are payable at their original normal pension ages.
In most circumstances, your earlier deferred benefits cannot simply be "merged" back into your new active membership. They remain as separate preserved benefits.
However, there are limited circumstances where a "rejoining" calculation applies if you return within a defined period after leaving with service in the 1995 or 2008 Section — the rules are scheme-specific and worth confirming with NHS Pensions if this applies to you.
The key practical point: leaving and returning to the NHS does not erase your deferred benefits. You retain everything you built up, and the new accrual adds to it at retirement.
- •NHS pension transfers over £30,000 require regulated financial advice before they can proceed — this is a legal requirement.
- •A deferred NHS pension is a guaranteed income for life. Transferring to a DC pension gives up this guarantee permanently.
- •Always contact NHS Pensions for your specific deferred benefit statement before making any decision.
This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.