An added years contract is a service based benefit that was only available in the 1995 section of the scheme. It allowed members who could not achieve the maximum scheme membership at their normal pension age of 60 (or 55 for MHOs) to purchase additional membership. This additional membership provides you with additional index-linked pension and tax-free lump sum. Whilst membership of the 1995 section ceased for all on 31 March 2022 a purchase can continue on transitioning to the 2015 scheme.
The McCloud judgement means that the Government has had to rectify the age discrimination which was introduced in the way members of legacy public sector schemes were protected from or moved to reformed public sector schemes. This has resulted in the closure of the NHS legacy scheme from 1 April 2022 and the roll back of service in the remedy period, 1 April 2015 to 31 March 2022, for those in scope back to their legacy scheme (1995 or 2008 section in the NHS). Some members with added years contracts during the remedy period felt forced to cease the purchase due to the impact on pensions taxation. Whilst the remedy does not specifically deal with the resumption of any such purchase individuals can make a case to their relevant scheme about their specific contingency situation and the BMA Pensions Department can assist with this.
Purchasing added years
- Full and half-cost added years are normally purchased by regular instalment.
- The maximum amount of additional contributions you can pay towards purchasing added years is 9% of your pensionable pay.
- Half-cost added years are available if you took a refund of contributions for any service prior to 6 April 1978, or at any time for contributions made as a self-employed GP.
- An added years contract must start on your birthday and end at age 55, 60 or 65.
- The relevant pensions agency will be able to advise if you ever received a refund.
- The added years contract must run for a minimum of two years.
The cost is determined by the Government Actuary Department and is based on the following factors:
- your age at the start of the contract (your next birthday)
- the end date for the contract (your 55th 60th or 65th birthday)
- the number of added years you are purchasing.
The actuarial factors determining the cost to purchase one added year are detailed in schedule 1 of the NHS pension scheme regulations.
Your total membership in the 1995 section was restricted to 40 calendar years at age 60 (age 55 for mental health officers) and 45 years overall. Reaching these limits does not prevent resumed pensionable service in the 2015 CARE scheme after retirement.
The number of added years you can purchase depends on the amount of membership you will accrue at the normal pension age of 60 (55 for MHOs), but is restricted by the 9% contributions limit.
Purchasing added years will increase your 1995 section pension, lump sum and dependant benefits as follows:
- if you are a secondary care doctor, each added year provides an extra 1/80th of final pensionable pay at retirement
- if you are a GP your average annual dynamised earnings during the period of the purchase will be multiplied by the amount of years bought. This amount is then credited to your total dynamised career earnings. Your total career earnings figure is then multiplied by 1.4 % to calculate the pension.
In both cases a lump sum will also be payable equivalent to three times the added years pension.
Yes. You can elect to purchase additional pension even if you have already purchased added years or are currently contributing to an added years contract up to the maximum permitted.
See our guidance on additional pension purchase for further information.
All members will have joined the 2015 scheme from 1 April 2022. No further membership of the 1995 or 2008 section is permissible after this date.
The added years contract continues to provide additional years and days of pensionable service in the 1995 section of the scheme for so long as you continue to contribute.
Changes to your contract contributions
The percentage contribution is fixed at the outset. This cannot be altered and will not be affected by any scheme contribution increases.
You will be required to pay the pension contributions owing. If you do not wish to do this the contract will terminate at the date contributions were last paid.
If you wish to make up the arrears you should be able to agree a reasonable time scale to do so. The BMA pensions department can assist you.
Repaying the arrears will not impact your pension growth for annual allowance purposes. Your added years growth should still be averaged over the length of the intended added years contract.
Changes to your circumstances
If you are a secondary care doctor, an added years contract assumes that you will be working whole-time without interruption for the duration of the contract.
Any part-time work undertaken during the contract period reduces the amount of added years purchased. For example, if you bought ten added years and throughout the contract period you were working half-time you would have paid for and be credited with five added years.
If you are a primary care doctor, the benefit of an added years contract is based on your pensionable earnings during the contract period.
Part-time work for GPs will usually result in less income earned. As a result, you will be paying contributions towards the contract on less income and will subsequently receive less benefit from the contract than if your earnings had been higher.
It is possible to request a cancellation of an added years contract by contacting the relevant pensions agency. This can now be done without having to satisfy the pensions agency of financial hardship.
You are strongly advised to seek independent financial advice when considering cancelling an added years contract as you will not be able to restart the contract once it has been cancelled.
Furthermore, your benefits will not be as great as you originally anticipated as you will only have completed and been credited with a proportion of your added years purchase.
It is not possible to receive a refund of added years contributions paid. You will receive a portion of the added years you contracted to buy. Any cancellation is only prospective.
The effect on your added years contract will depend on the duration of the break.
If you rejoin the scheme within 365 days of leaving or opting out of the scheme, you will be able to restart your added years contract.
If you rejoin the scheme after 365 days or more of leaving, you will not be able to resume your added years contract and, upon retirement, you will be credited with the additional service you paid for up to the date of leaving.
Contributions for added years during both paid and unpaid maternity leave are payable on your salary immediately prior to your maternity leave.
If you choose not to pay pension contributions on your unpaid maternity leave this period will be treated as a break in pensionable service and will reduce the amount of added years you are purchasing.
If your break in pensionable service is for 12 months or more you will not be able to resume your original added years contract.
Contributions for added years during a period of paid sick leave are payable based on your salary immediately prior to your sick leave.
If the leave is unpaid, along with contributions for the main pension scheme, your added years contributions will stop. Membership throughout an unpaid period will not count for pension purposes.
If your unpaid absence is for 12 months or more you will not be able to resume your original added years contract.
If you choose to pension the period of authorised absence then you will continue to pay towards your added years.
If you choose not to pension your period of unauthorised absence and your unpaid absence is for 12 months or more you will not be able to resume your original added years contract.
Changes to your employer
You need to pay added years contributions for all of your pensionable employment up to a maximum of whole time (10 PAs).
You will need to let your new employer know that you have an added years contract and provide them with a copy of the election form you signed when you started the contract.
If you do not have this available, your new employer should be able to verify the contract with the relevant pensions agency and begin deducting the required contributions from your pay.
You will need to let your new employer know that you have an added years contract and provide them with a copy of the election form you signed when you started the contract.
If you do not have this available, your new employer should be able to verify the contact with the relevant pensions agency and begin deducting the required contributions from your pay.
If the move is permanent, you may also wish to consider transferring your accrued pension membership to the relevant nation.
Leaving employment
If contributions have been made for less than one year they will be refunded.
If you retire on health grounds prior to age 60 your contract will be paid in full, at no further cost and you will be credited with all the added years you elected to purchase.
If you are a secondary care doctor and you worked less than whole-time during any part of the contract then this will be reflected in the amount of added years credited to you on ill health retirement.
If you retire on health grounds after age 60, and your contract was due to end at age 65, you will not be credited with the full purchase.
You will be credited with that portion of the contract completed at the date of retirement and this will be actuarially reduced to reflect its early payment.
If you claim your pension benefits before your added years contract end date, you will be credited with that portion of the contract completed at the date of retirement and this will be actuarially reduced to reflect its early payment.
If contributions have been made for less than one year they will be refunded.
If you die before age 60 and you are contributing towards an added years contract the contract will be paid in full and added to the benefits payable to any dependents. This will be based on the pension that would have been paid had you retired on health grounds as at the date of death.
If you die after age 60, and your contract was due to end at age 65, you will not be credited with the full purchase. Your dependents’ benefits will be credited with that portion of the contact completed at the date of death and this will be actuarially reduced to reflect its early payment.
If you are over the minimum pension age (50 for members with protected rights in relation to 1995 section accrual and 55 for all others) and choose to claim your pension benefits under the redundancy arrangements, you will be credited with the proportion of added years you have paid for.
An actuarial reduction will apply as the benefits will be paid earlier than the intended contract end date. This is the case even if you have used your redundancy payment to meet the cost of the unreduced pension (for those under age 60 in relation to 1995 section accrual, 65 in relation to 2008 section accrual and State Pension Age in relation to 2015 CARE scheme accrual).
If you choose not to claim your pension benefits or you are below the minimum retirement age, you will be credited with the proportion of the added years purchase completed at your leaving date.
You will only be able to restart your added years contract if you rejoin the scheme within 12 months of leaving.
Tax
HMRC allows tax relief on pension contributions up to 100% of relevant UK earnings for the tax year. Your added years contributions will therefore benefit from tax relief.
Please note that breaching the annual allowance may result in a tax charge. Whilst the Lifetime allowance will continue to be tested for until 5 April 2024 any benefits in excess up until that date will only be subject to taxation at the individual’s marginal rate of income tax and not at the rate of the Lifetime Allowance charge. From 6 April 2024 it is expected that the Lifetime Allowance will be abolished with only a limit on the tax free lump sum remaining.
The amount of added years purchased will be taken into account when calculating the growth in the pension benefits during the pension input period.
For example, if you are a full time secondary care doctor with a contract to buy five added years, which began on your 50th birthday and is due to be completed on your 60th birthday, you will accrue an extra half a year of service in each year during the term of the added years contract.
This additional membership needs to be added to your standard membership when calculating your pension growth.
See our annual allowance guidance for more information.
This limit is due to be abolished from 6 April 2024 with only a restriction on the level of tax free lump sum remaining.
See our lifetime allowance guidance for more information.