How NHS pensions grow

Under the 2015 NHS Pension Scheme, your pension grows in three main ways.

First, you build up pension each year at a rate of 1/54 of your pensionable pay.

Second, while you remain an active member of the NHS Pension Scheme, the pension you’ve already built up usually increases each year by Consumer Prices Index (CPI) inflation plus an additional 1.5%. This process is known as NHS pension revaluation.

Third, once you retire and start taking your NHS pension, your income will normally continue increasing each April in line with CPI inflation.

This combination of annual pension build-up and inflation-linked increases is one reason the NHS pension scheme is widely regarded as one of the strongest workplace pensions available in the UK.

What is the 2015 NHS Pension Scheme?

Most NHS staff are now members of the 2015 NHS Pension Scheme.

This is a Career Average Revalued Earnings (CARE) pension scheme. Rather than basing your pension on your salary close to retirement, your pension builds up gradually throughout your career.

Each year creates a separate slice of pension based on your earnings for that year. Those slices are then increased over time through NHS pension revaluation.

How the 2015 NHS Pension Scheme differs from older NHS pensions

Older NHS pension schemes mainly used a final salary structure.

The 2015 NHS Pension Scheme works differently because it’s based on career average earnings plus annual revaluation.

How much NHS pension do you build up each year?

Under the 2015 NHS Pension Scheme, you build up pension at a rate of 1/54 of your pensionable pay each year.

For example:

If your pensionable pay is £54,000, you’d build up £1,000 of annual NHS pension for that year.

That £1,000 is annual retirement income payable for life once you reach retirement age under the scheme rules.

Each additional year you work in the NHS adds another slice of pension.

How NHS pension revaluation works

One of the most valuable parts of the NHS pension scheme is the annual revaluation applied while you remain an active member.

While you are working and remain an active member of the NHS Pension Scheme, each previous year’s pension benefits are usually increased annually by CPI inflation plus 1.5%.

This means your pension doesn’t simply stay fixed at the original amount earned.

NHS pension revaluation example

If your pensionable pay is £54,000:

• You build up £1,000 of annual NHS pension that year
• If CPI inflation is 2%, that £1,000 would usually increase to £1,035 the following year while you remain an active member
• The increase comes from 2% CPI inflation plus the additional 1.5% NHS pension revaluation uplift

Over time, these annual increases can make a significant difference to the value of your retirement income.

Why inflation protection matters

Inflation reduces the spending power of money over time.

The NHS pension scheme includes inflation-linked increases designed to help protect your retirement income against rising living costs.

Without inflation protection, a fixed retirement income would gradually buy less over time.

This is one reason defined benefit pension schemes such as the NHS pension scheme are often viewed as valuable long-term retirement benefits.

How NHS pensions grow after retirement

Once you start taking your NHS pension, your pension income will normally continue increasing each April in line with CPI inflation.

These increases are designed to help your retirement income maintain its spending power throughout retirement.

This can become particularly valuable during longer retirements or periods where inflation remains high for several years.

Ways to increase your NHS pension

There are several ways NHS staff may increase future pension benefits.

These can include:

• Building up additional years of NHS service
• Receiving pay increases or promotions
• Taking on additional pensionable NHS work
• Purchasing Additional Pension within the NHS Pension Scheme
• Using an Early Retirement Reduction Buy Out (ERRBO) arrangement to reduce early retirement reductions

The right approach depends on your personal circumstances, retirement plans and wider financial position.

Can NHS pension growth create tax issues?

Potentially, yes.

Although the Lifetime Allowance has been abolished, pension growth can still create tax considerations through the Annual Allowance.

The standard Annual Allowance is currently £60,000 for many people, although this can vary depending on your circumstances.

Defined benefit pension schemes calculate pension growth differently from defined contribution pensions. The calculation is based on the increase in the value of your benefits over the tax year, rather than simply the contributions paid in.

For NHS staff, higher inflation, pay rises, promotions or additional sessions can all increase pension growth significantly.

This is particularly important for:

• Consultants
• GPs
• Senior clinicians
• NHS managers
• Long-serving NHS staff

Forward planning can help reduce the risk of unexpected tax charges.

Why understanding NHS pension growth matters

The NHS pension scheme remains one of the strongest workplace pensions available in the UK.

Understanding how NHS pensions grow can help you make more informed decisions around retirement planning, career progression and long-term financial security.

The key point is that your pension isn’t simply sitting still each year. While you remain an active member of the NHS Pension Scheme, the pension you’ve already built up usually continues increasing through annual NHS pension revaluation linked to inflation.

That inflation protection can become incredibly valuable over time, particularly during a long retirement.

If you’d like help understanding your NHS pension benefits or wider retirement planning position, Becketts is always happy to help.