If you’re made redundant and choose to claim your NHS Pension benefits before your normal retirement age, you may incur a capitalisation cost.
When capitalisation costs apply
You incur this cost only if you claim your pension early and choose to have an unreduced pension.
This means your pension payments are not reduced because you retired early. They’re the same as they would be if you retired at your normal pension age.
You do not incur capitalisation costs if you:
- defer your pension when you’re made redundant
- claim reduced pension benefits
How capitalisation costs are calculated
The cost is calculated based on the difference between how much your:
- unreduced pension would be if you retired at your normal pension age
- reduced pension and lump sum are worth when you claim your benefits
This amount is then multiplied by a factor provided by the Scheme Actuary. We also take your age into account.
Who pays the capitalisation costs
Depending on your circumstances, you may have to pay this cost using part or all of your redundancy payment.
There are situations where your employer is liable to pay the remaining cost if your redundancy payment does not meet the capitalisation cost.
When you have to pay the cost
When your employer has to pay
If you’re made redundant and your capitalisation cost is higher than your redundancy payment, your employer is liable for the shortfall if you are:
- not subject to Agenda for Change
- employed by NHS Wales
- a hospital doctor
- a hospital dentist
- a senior manager who is not subject to Agenda for Change
Interest of Efficiency cases
If you leave your employment in the Interest of Efficiency, your employer is liable for the capitalisation cost.