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Refund of Contributions

Following the introduction of Auto Enrolment, refund of scheme contributions can be made in the following circumstances:

Refund within the opt out period

Employers will be responsible for making a refund of any scheme contributions deducted from the date an employee is automatically enrolled in to the scheme until they opt out during the initial opt out period. (See the Pension Regulators website for full details of the opt out period).

Refund out with the opt out period/ceasing active membership

Out with the initial opt out period, active members who cease membership can apply for a refund as soon as they leave pensionable employment.

To qualify for a refund out with the opt out period/ceasing active membership, you must:

have ceased membership of the scheme;

have less than two calendar years membership of the scheme; and

not have transferred in service from a personal pension scheme.

You will not qualify for a refund:

if you opted out of the scheme within the initial opt out period - your employer is responsible for returning these contributions;

if you have more than two years membership.

If you satisfy the criteria to qualify for a refund, please complete form OPT OUT if you are ceasing active membership or form REF1* if you left the scheme some time ago, and send it to SPPA.

*The SPPA are unable to process applications with a temporary national insurance number. To avoid delay in receiving a refund, please ensure you supply a valid national insurance number.

About your refund

The SPPA may need to obtain information from your employer and HMRC before your refund payment can be made. A refund should, therefore be made within one month of all relevant information being received.

If you want to change any of the information you have given with your application, such as your home address or bank details, you must tell us in writing.

General information about refunds

A refund is normally between half and two thirds of the contributions paid. This is because the SPPA must, by law, make two deductions from your gross contributions. The first is for the cost of reinstating you into the Second State Pension. The second is for income tax.

Reinstatement into Second State Pension

Members of the NHS Superannuation Scheme were contracted out of the Second State Pension (S2P) up to 5 April 2016 when contracting out ended. When SPPA makes a refund, we must also pay what is known as a Contributions Equivalent Premium (CEP) to HMRC, to reinstate your benefits in the State Scheme. The deduction from the refund is your share of this CEP payment, this only takes into account service pre 6 April 2016.

If you would like further information about this, please write to:

HMRC
Longbenton
Newcastle-upon-Tyne
NE98 1YX

(quoting your National Insurance number)

Income tax

Tax at 20% must be taken from the amount remaining after the deduction of CEP, regardless of any tax relief due at the time of the refund or allowable when contributions were originally paid. You cannot reclaim this tax from the HMRC.

Alternatives to refunds

Taking a refund may not be your only option. For example, if you join an approved pension arrangement within a year of leaving the superannuation scheme, you can transfer your benefits to your new scheme (provided your new scheme is willing to accept a transfer). To do this you, or your new pension provider, must apply to SPPA within a year of you joining them.

Approved pension arrangements are:

another occupational pension scheme;

an annuity under Section 32 of the Finance Act 1981 with an insurance company;

a personal pension if you have one, or buy one.

If you have more than two years membership of the superannuation scheme, you do not qualify for a refund. But you can transfer your benefits to any of the pension arrangements listed above. The option to transfer is open to you until your pension benefits become payable.

A further option, if you have more than two years membership of the Scheme, is to preserve your benefits in the NHS Superannuation Scheme. This would provide pension benefits, payable at either age 60 or 65 depending on which regulations your service is governed by. However, in some cases early payment may be applicable. The preserved pension benefits will be index linked.

Link to Scottish Government Website