Comparison Guide · Updated May 2026
SIPP vs NHS Pension: Should You Open a SIPP as an NHS Worker?
The NHS 2015 CARE scheme is one of the finest workplace pensions in the UK — a defined benefit scheme giving 1/54th of your Career Average salary each year, with a 23.7% employer contribution and CPI-linked increases. But that does not mean a SIPP is irrelevant for NHS staff. If you have locum income, want to use carry-forward Annual Allowance, or simply want to save more above your NHS pension accrual, a SIPP can play a valuable complementary role. This 2026/27 guide explains how both schemes work, how the Annual Allowance interacts, and uses a Band 6 worked example to show when adding a SIPP makes sense.
NHS 2015 CARE Scheme vs SIPP — Side by Side
| Feature | NHS 2015 CARE Scheme | SIPP |
|---|---|---|
| Type | Defined benefit (DB) | Defined contribution (DC) |
| Accrual / growth | 1/54th of that year's pensionable pay added per year | Depends on fund performance — not guaranteed |
| Employer contribution | 23.7% of pensionable pay | None (personal SIPP) — you fund it yourself |
| Employee contribution | 5.1%–14.5% depending on pay band | Whatever you choose (up to 100% of earnings) |
| Revaluation in deferment | CPI-linked — inflation protected | Market returns — can fall as well as rise |
| Inflation protection in payment | CPI increases each year | Depends on drawdown/annuity strategy |
| Retirement age | 65 or State Pension Age (can take early with reduction) | From age 57 (2028 change from 55) |
| Tax-free cash | 25% of transfer value (or PCLS rules) | 25% up to Lump Sum Allowance (£268,275) |
| Investment choice | None — defined benefit formula | Full — equities, bonds, property, cash |
| Flexibility | Low — fixed formula, annuity-style income | High — drawdown, lump sums, legacy planning |
| Death benefits | 3× salary lump sum + survivor pension | Entire pot can pass to beneficiaries (IHT-free pre-2027) |
| Annual Allowance impact | PIA = 16× change in pension accrued | Actual contributions count toward AA |
The NHS 2015 CARE Scheme in Detail
The NHS 2015 Pension Scheme is a Career Average Revalued Earnings (CARE) scheme. Every year you work, you accrue a pension equal to 1/54th of your pensionable pay for that year. That slice is then revalued each April by CPI plus 1.5% until you retire, at which point all the annual slices are added together to form your annual pension.
Key features of the 2015 scheme:
- Accrual rate: 1/54th ≈ 1.85% of pensionable pay per year of service
- Revaluation in deferment: CPI + 1.5% per year until retirement
- Normal Pension Age: your State Pension Age (currently 66, rising to 67 by 2028)
- Early retirement: available from age 55 (rising to 57 in 2028) with actuarial reduction
- Employer contribution: 23.7% of pensionable pay — an extraordinary level unmatched in most private sector pensions
- Employee contribution rate: 5.1%–14.5% on a tiered scale based on actual earnings
- Survivor pension: 37.5% of member pension to spouse/civil partner on death
- Ill health retirement: enhanced tier payable if unable to work in any capacity
Employer Contribution Value: Why This Matters
The 23.7% employer contribution is money that goes directly into your pension that you would not receive in cash. For a Band 6 nurse on £40,000:
- Employer contribution: 23.7% × £40,000 = £9,480/year added to your pension on your behalf
- Employee contribution (Band 6 at 40k): approximately 9.8% × £40,000 = £3,920/year from you
- Total annual pension input: £13,400/year in effective contributions
- Annual pension accrued: £40,000 ÷ 54 = £741/year of guaranteed lifetime income
You cannot replicate the employer contribution in a SIPP. This alone means the NHS pension should always be maximised before any SIPP saving — opting out of the NHS scheme to use a SIPP is almost never the right decision.
When a SIPP Makes Sense Alongside Your NHS Pension
There are clear scenarios where NHS staff benefit from opening a SIPP:
- Locum or private income: self-employed locum or private practice income is not automatically pensionable under the NHS scheme. A SIPP captures this income with full income tax relief.
- Additional savings above NHS accrual: if your NHS pension input uses only £12,000 of the £60,000 Annual Allowance, you have £48,000 of headroom for additional SIPP contributions.
- Carry-forward opportunities: unused Annual Allowance from the past 3 years can be brought forward if you had a windfall, bonus, or period of reduced NHS pension accrual.
- Flexibility and legacy planning: unlike DB schemes, SIPP funds can be passed entirely to beneficiaries on death — potentially IHT-free (though rules change from April 2027).
- Bridging early retirement: if you want to retire before your NHS NPA (State Pension Age), a SIPP accessible from age 57 can bridge the income gap until the NHS pension becomes payable at full rate.
Annual Allowance Interaction: Band 6 Worked Example
Sarah: Band 6 NHS Nurse, Age 38, Salary £40,000 + £12,000 locum income
| NHS pensionable pay | £40,000 |
| NHS pension accrued this year (1/54th) | £40,000 ÷ 54 = £741/year pension |
| NHS Pension Input Amount (PIA) = £741 × 16 | £11,856 |
| Annual Allowance 2026/27 | £60,000 |
| Remaining AA headroom for SIPP | £60,000 − £11,856 = £48,144 |
| Locum income earned | £12,000 |
| Maximum SIPP contribution from locum income | £12,000 (100% of locum earnings) |
| SIPP contribution (net, basic rate relief) | £9,600 (HMRC adds £2,400 = £12,000 gross) |
| Higher-rate tax relief reclaimed via self-assessment | £2,400 extra (40% taxpayer on £12,000 contribution) |
| Total effective pension saving on locum income | £12,000 gross — 0% net cost at 40% tax |
Illustrative only. NHS PIA calculation uses CPI factor adjustment in practice. Tax relief calculation assumes Sarah's total income (£52,000) puts £12,000 of locum income in the 40% band. Always verify PIA with your NHS Pension Savings Statement.
Tax Relief on SIPP Contributions
SIPP contributions attract income tax relief at your marginal rate. The mechanism:
- You pay contributions net of basic-rate tax (20%). For every £800 you pay in, HMRC adds £200 — your SIPP receives £1,000 gross.
- If you are a higher-rate (40%) taxpayer, you reclaim the additional 20% via your self-assessment tax return — an extra £200 rebate per £1,000 gross contribution, reducing net cost to £600.
- Additional-rate (45%) taxpayers can reclaim 25% beyond the basic-rate top-up — net cost £550 per £1,000 gross.
- Total contributions in a tax year (gross) cannot exceed the lower of 100% of your UK earnings or the Annual Allowance (£60,000 in 2026/27).
Key Sources
Frequently Asked Questions
Is the NHS pension better than a SIPP?
For most NHS employees the 2015 CARE scheme is significantly better than a SIPP as a primary pension. The guaranteed defined benefit accrual (1/54th of revalued Career Average salary each year), employer contribution of 23.7% of pay, CPI-linked increases in deferment and payment, and death-in-service benefits are extremely valuable and not replicable in a defined contribution SIPP. The NHS pension is one of the best workplace pensions available in the UK. A SIPP is best considered a supplement — for additional savings above Annual Allowance headroom, locum income, or flexible access needs.
Can NHS staff open a SIPP as well as their NHS pension?
Yes — there is no rule preventing NHS employees from holding both the NHS Pension Scheme and a personal SIPP simultaneously. You can contribute to a SIPP from any earnings, including NHS salary, locum income, or private practice income. The key constraint is the Annual Allowance: total pension input (NHS pension growth, valued at 16× the increase in annual pension accrued, plus any SIPP contributions) must not exceed £60,000 (2026/27 Annual Allowance) without triggering a tax charge — unless you use carry-forward from unused allowances in the previous 3 years.
How is the NHS pension Annual Allowance measured?
For defined benefit schemes like the NHS 2015 CARE scheme, the pension input amount (PIA) is calculated as: (pension accrued at end of scheme year × 16) minus (pension accrued at start of scheme year × 16 × CPI factor). In practice, for a Band 6 nurse earning £40,000: annual accrual = £40,000 ÷ 54 ≈ £741/year pension. PIA ≈ £741 × 16 = £11,856. This uses just under £12,000 of the £60,000 Annual Allowance — leaving approximately £48,000 headroom for SIPP contributions in the same tax year (assuming no carry-forward complications). High earners and consultants accruing larger pensions may have limited SIPP headroom and should take specialist advice.
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What is carry-forward Annual Allowance and how does it help NHS staff?
Carry-forward allows you to use unused Annual Allowance from the previous 3 tax years, provided you were a member of a registered pension scheme in those years. NHS employees are always members of the NHS Pension Scheme, so they almost always qualify. If in 2022/23, 2023/24, and 2024/25 your total pension input was significantly below your Annual Allowance, you may have £30,000–£100,000+ of carry-forward available. This is particularly valuable for: paying a large SIPP contribution in a year of bonus income, making up for years of underpensioning, or planning retirement contributions after a big financial event. Calculate carry-forward carefully — the current year allowance must be used first, and the year you carry forward from must be used oldest-first.
Should a locum doctor or agency nurse open a SIPP?
Yes — locum and agency NHS workers doing work outside their substantive NHS post may not have that income automatically enrolled into the NHS Pension Scheme (agency work via a limited company is not eligible; self-employed locum income may not be either). A SIPP is an ideal vehicle to receive pension contributions on locum earnings: contributions attract full income tax relief at your marginal rate, the funds grow tax-free, and you access them from age 57 (rising to 57 in 2028). A SIPP contribution of 20% on £30,000 of locum income = £6,000 contribution, topped up by HMRC to £7,500 at basic rate, or you reclaim higher-rate relief (£12,000 effective contribution at 40% tax rate) via self-assessment.
Can I opt out of the NHS pension and put the money in a SIPP instead?
You can opt out of the NHS Pension Scheme, but this is almost never advisable. Opting out means losing: the 23.7% employer contribution (which you cannot replicate in a SIPP — only your own contributions get tax relief), the guaranteed defined benefit accrual, inflation-linked increases, and death/ill-health benefits. You would need to achieve exceptional SIPP investment returns to compensate for losing the employer contribution alone. If your concern is the Annual Allowance tax charge, consider reducing NHS pensionable pay via salary sacrifice arrangements, or taking pension savings statements and modelling the charge before opting out.
What happens to the NHS pension if I leave the NHS?
If you leave NHS employment with at least 2 years of qualifying membership, your NHS pension is preserved (deferred). It continues to be revalued in line with CPI until you draw it — currently from age 60 (2008 scheme) or 65/state pension age (2015 scheme), though you can take it early with actuarial reduction. You cannot transfer a deferred NHS pension into a SIPP unless the transfer value exceeds £30,000, in which case regulated financial advice is legally required before transfer. For most NHS staff, transferring out is highly inadvisable given the guaranteed income and benefits of the defined scheme.
Does the NHS pension affect SIPP tax relief calculations?
Not directly. SIPP tax relief is calculated on your UK earnings (up to 100% of earned income in the tax year, capped at the Annual Allowance). The NHS pension does not reduce the amount of SIPP contributions you can make — it does count against the Annual Allowance (as pension input), which may limit total contribution room. The key interaction: if your NHS pension input (PIA) plus SIPP contributions exceed £60,000, you face an Annual Allowance tax charge on the excess at your marginal rate. Pension savings statements from NHS Pensions (available on ESR or by request) show your PIA figure for each tax year.
What is the Tapered Annual Allowance and does it affect NHS consultants?
The Tapered Annual Allowance (TAA) reduces the Annual Allowance for high earners. In 2026/27: if your "adjusted income" (total income including employer pension contributions) exceeds £260,000, the AA tapers down by £1 for every £2 of income above £260,000, to a minimum AA of £10,000. NHS consultants earning £120,000–£150,000 often have adjusted income around £170,000–£200,000 including the 23.7% employer contribution (valued at NHS pension PIA for TAA purposes). Most consultants below £200,000 adjusted income are not tapered — but should check annually. The 2023 Budget permanently removed the Lifetime Allowance, reducing one major constraint on NHS pension saving.
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