You’d be forgiven for wondering if your NHS pension scheme is still good value for money. With tiered contributions as high as 14.5% of pay, annualisation of these tiers meaning part-time doctors pay a far higher real percentage, penalties of up to 5% per year if you want to take benefits ‘early’ at 60, and possible tax charges if your NHS pension causes you to breach your annual or lifetime allowances.
Coupled with stories of ‘lost’ contributions and the ongoing inaccuracy of the information held by the scheme abound you may start to question if you should consider opting out of the NHSPS.
Are personal pensions a good alternative?
The onset of pension freedoms made personal pensions increasingly attractive but then the threat of lifetime allowance charges and annual allowance breaches took personal pensions off the table as a retirement tool for most.
With the NHS pension scheme using up all of these two allowances a few clients have suggested they would rather leave the NHSPS and rely on personal pensions alone for their on-going pension provision.
So how would that work?
If you did this, you could keep your annual allowance from breaching by ensuring your personal pension contributions remained under £40,000 (capped at your taxable earnings sum if less). However under the new tapering allowance rules the vast majority of doctors and dentists won’t have their annual allowance reduced as ‘normal’ career progression is within the annual allowance a majority of the time – so no advantage there.
If you switched to personal pensions you would still be highly likely to fall foul of the lifetime allowance as it would be calculated using the sum total of the deemed value of your NHS pension scheme, and the value of your personal pension.
Also, if you invested in the markets within your personal pension, you may, if your risk tolerance allows, experience volatility that could see your fund value either reduce scarily or zoom past the lifetime allowance in swings in value outside your control. This is, unless you are invested very cautiously, in turn attracting potentially low returns. To gain the security of the NHSPS you would be taking so little risk your fund values would struggle to keep up with inflation.
The NHS pension scheme offers risk-free returns
Why wouldn’t you stick with the NHS pension scheme that provides an income in retirement that doesn’t rely on investment returns and other benefits that are hard to replicate elsewhere? Benefits such as the Ill Health Retirement Pension, Life Cover (death in service), and uplifts for your spouse’s pension. Replicating these alone would cost a large % of your earnings, adding weight to any argument regarding the benefit of remaining in the NHS pension scheme.
What would it cost you to replicate these benefits outside the NHSPS?
We have run these calculations many times over the years and the outcomes don’t change. The percentage of your income you could need to invest in personal pensions to achieve the same level of income in retirement as the NHS pension scheme provides is often 3-4 times the amount you actually currently contribute. This of course varies by the individual, but the theme remains – the older you get the more you would need to contribute.
Quite apart from the physical levels of money you would need to invest you would require some pretty unrealistic investment scenarios to play out; low risk and high, consistent returns, to come close even with these much higher contribution levels.
Alternative ways to fund your retirement
Don’t forget, pensions aren’t the only way to invest for your post work life. ISAs, general investment accounts, structured products or even venture capital trusts could all form part of your retirement planning.
So, is the NHS pension scheme still good value for money?
We truly believe it would take either some extreme investment choices or high contributions to match the equivalent NHS pension. Not only is the NHS pension scheme still good value for money, importantly, a major part of your retirement planning is taken care of for you.
What’s right for you will depend on your overall situation and attitude, plus your understanding of risk so you should seek financial advice. This is also true if you think your pensions will fall foul of either the annual or lifetime allowances.
Remember the NHS pension scheme never stands still so keep informed and keep revisiting your plans!
Do you think the NHS pension scheme is still good value for money? Let us know by adding a comment below
Editor’s note: This post was originally published in August 2018 and has been completely revamped and updated for accuracy and comprehensiveness.
these figurs dont seem right. Are they based on having no existing pension already- hence each years contribution gives you such and such extra compared to a huge personal pension contribution for the same year.
hat you omit is that pensions rules have changed several times in a few years. They will continue to raid this particular pot of money into the future so that pensions come with huge uncertainty. I wonder if we are better off by investing in ISAs every year rather than pensions. At least i know th ISA is safe from future looting.
Hi there,
I think there is an error in the second scenario:
“Scenario 2: Your basic pay is £45,000. Your planned retirement age is 65 (earlier than state pension age). You have some pension in the old 1995 and/or 2008 NHS Pension Schemes and you are a member of the 2015 NHS Pension Scheme.
NHS Pension vs Personal Pension for a 35 year old
1 year’s NHS Pension contribution will give you an NHS Pension of £2,356.25 per annum (index linked) at age 65.”
NHS Pension scheme 2015 accrual rate is 1/54 – therefore for £45000 pensionable pay it will accrue £833 per annum (index linked) at age 68 (not 65 – use state pension age calculator for someone 35 now). it would be 65 for a woman.
I think NHS Pension scheme is value for money for anyone earning less than £47845 (9.3% employee contributions), for everyone else it is useless – because you will need to draw pension for atleast 14.6 years (from age 68) to even get back all the cumulative contributions (both employee and employer contributions).
Hi
We will check our figures again and get back to you. Thanks for the comments
Kind Regards
Legal and Medical team
Response to Rajiv
Thanks for your comments. It is true that nothing is certain when it comes to Governments and regulations. So Pension rules can change, and so could NISAs. The plus side to the existing changes to pension regulation is that it has all been put in place for future pension savings and not retrospectively. This has not been the case for other EU countries. So at least we can be somewhat assured that any future changes will affect future pensions, and not current/past contributions.
Response to Himanshu
The scenarios given hope to reflect possible retirement ages of 25, 35 and 45 year olds. For a 35 year old they may decide to go earlier or later than 65 depending on individual desires, but 65 is given as an example here. The 2015 scheme is linked to State Pension Age of 68 so in the example they are taking it early with a reduction applying. State Pension Age is in the process of being equalised for Men and Women and a 35 year old (male or female) will have a State Pension Age of 68, though this may rise further in the future.
On the point of value for money – even if paying 12.5%, 13.5% or 14.5% contribution rates the NHS Pension is still good value for money. This is shown in the example of the 45 yr old contributing 13.5% of income into the NHS Pension as opposed to 40.7% if using a Personal Pension. The way in which the career average is increased helps a lot as the increases are in line with Consumer Price Index (CPI) inflation + 1.5% on top. If it were possible, I would happily swap my personal pension for anyone in the NHS Pension (even if contributing 14.5%).
Public sector pensions cannot be passed onto adult children and if you are single or already a widow/ widower the contibutions paid are lost.
I think its important to highlight the downsides to public sedtoe pensions as well as the benefits.
Hi Theresa
Thank you, that is a good point, particularly in light of recent legislative changes that allow such freedoms in other pension environments.
Am I correct in assuming that the 13.5% contribution is pre tax . In other words you are actually only paying 60% of this amount? That certainly makes it a lot better.
Could I also ask you to comment on the extra years contracts that many people will have? Given that these are often very large sums extra that we pay, are they worth keeping on paying for the sake of buying just one or two extra years?
Thanks
Hi Rajiv
Your assumptions are correct in that the contributions are taken from your income and you then pay tax on your residual income. This means you are tax relieved at your marginal rate of tax.
The added years questions is more difficult and should be reviewed on an individual basis. For many it will give them a chance of retiring on a large pension and potentially prior to the new normal retirement age. One of the side effects of the new pension legislation is that the added years may increase your chances of breaching the annual allowance, so be ware
Regards
Max
Hello i have just started a partime job in the nhs on switchboard at level 2 which is very low and i am 59 so i retire at 68 is it worth paying £25 a month into the nhs pension scheme or noy
Hi Jane
As you can imagine it is very difficult to give advice without knowing a persons full financial background. The NHS Pension provides other benefits, so these need to be taken into account. As the article suggests it is good value, even if contributing a small amount.
Regards
Max
Hi
Is it worth taking the Money Purchase Additional Voluntary Contributions (MPAVC) the NHS Pension advertise via Standard Life and Prudential ??
I have 15 years in the 1995 scheme and will do 25 years of the 2015 scheme which means I plan to retire at 62.
Is there anyway of working out any shortfall required to retire at 62 given the 2015 scheme retirement age is 67 ?
Hi Ian
The advanatage to the MPAVC is that they have low charges, but there is no advice given, in respect of their suitability or the ongoing management of them. Recent changes to pension legislation means that you need to be careful when looking to invest in a pension. Breaching the annual allowance, which is the amount you are able to contribute to a pension environment each year, will lead to tax penalties. The same can be said for the lifetime allowance. If your intention is to boost your savings in order to help provide in retirement, then a MPAVC is a consideration, but there are many other options. I would suggest that you may wish to meet with an adviser to discuss your position.
Kind Regards
Max
Hello,
I am you classic case 1.
I am 25 with 2 years under my belt and on a salary of around 30,000 and no contributions in the 2008 scheme.
I have recently been told by a more senior member of staff that those in the 2015 scheme will only be able to claim their NHS pension when they reach the state pension age. Is this true? I originally thought that you could start claiming your NHS pension at 65 if you were in the 2015 scheme.
I am worried as the state pension age could (probably will)continue going up and I don’t fancy working till I’m in my 70s.
Dear Jem,
I think I should write an article on why not to take advice from a colleague. In this case there is some truth in what they say. The mew pension scheme has a normal retirement age that is linked to the state pension age. You can draw your pension earlier than this, but there are penalties for doing so. In a majority of cases the NHS pension is still an extremely good option.
Kind Regards
L&M team
The NHS pension scheme changes in recent years do call the value of the schemes into question. Conservative governments have consistently undermined the schemes and, with no effective opposition, they could be in power for the next 10 years or more. Who’s to say they will stop making unilateral changes with no meaningful negotiations? In recent years they have dramatically reduced what we will get back (changed the index-linking method), greatly increased members’ personal contributions, added 7 or more years of working and removed the national insurance discounted rate (related to serps) . The government can continue to do this at will. Plus they are supported in doing this by right-wing media and think tanks. I even have friends in the private sector who resent me for being in the NHS pension scheme despite being paid massively more for similar work and receiving huge bonuses, prestige company cars and many other benefits that are unheard of in the public sector. I am tempted to leave the scheme and put my £800 per month into overpaying my mortgage.
Hi Harry, thanks for your comment. Your points highlight the need for the article in many ways because you are correct in terms of the actions that have been taken and the impact that they have on the cost and the benefit of being in the scheme. The fact that the cost to replicate the benefits for each of the examples is so high, highlights how good a deal the original pension was, if taken in isolation.
The initial change to the scheme was made to new joiners in 2008, by the then Labour government and offered as an option to those already in the scheme. Unsurprisingly the take up of the offer was low, based on the fact that it was in essence designed to save money for the NHS employers, which by implication would have to cost the scheme members more. It also introduced a retirement age of 65, up from the 1995 section retirement age of 60, and started the process of increasing the contribution levels based on the level of income. I only mention this to make the point that it is Government generally rather than party politics that has eroded the benefit of the scheme.
Before giving in to the temptation of leaving the scheme I implore you to take some advice. Contributions to the scheme benefit from tax relief at your highest marginal rate, which could mean that your £800 per month is only £640 once tax at the basic rate is allowed for or £480 per month if you are a higher rate taxpayer. You would also lose the impact of your employer’s contributions to your pension.
While it isn’t possible to claim that the scheme is as beneficial as it has always been, the question in terms of planning from this point forward should be whether it is still good value for money. I think that the article shows that, in its current format, it is.
Hi
Can I ask advice here please?
I worked for the NHS in Scotland for 6 years between 1975 – 81 and then left to have children. We moved to England and I have worked for a local authority ever since. As I am now approaching retirement age (65 and 5 months) I wrote to NHS Scotland for a pension forecast. I was told that if I waited until my state retirement age I would lose out on the pension I could claim now as it wouldn’t be backdated. Presumably (although not stated and I can’t get them to confirm this) I have already lost out on 3 years of payments as I am 63 (this week!). As I always assumed I could only claim this at state pension age I feel let down for not being told that I could claim it at 60.
Can I demand to have it backdated?
Hello Susan,
Thank you for your comment and I am sorry to hear that you feel let down by the NHS pensions agency. As you are now 63 I suspect that you are a member of the 1995 section of the scheme, which means that you were able to start drawing on the benefits of the scheme from age 60 onwards. I am afraid that you would need to raise your query directly with the NHS pensions agency themselves, but I suspect that demanding back payment for money that you should have received may prove difficult, unless you can show that there has been some form of negligence in terms of making you aware that your benefits were available. You have nothing to lose by making the enquiry, but I don’t think that they are obliged to back date the payments. I am sorry that I cannot be of more help.
Best regards
Richard
Thank you Richard
I have written to them about this and sent it in with my completed application to draw my pension. As they haven’t even bothered to answer my letter but have approved the pension I am sure you are correct and I have lost 3 years of pension. Seems really unfair.
Hi Susan, it does seem to be unfair. Do let us know if you do hear from them.
Kind regards
Richard
Hi, I have approx 11 yrs 1995 scheme. Im now in 2015 scheme and have approx 17 working yrs left. Ideally i wld like to retire at 63 not 67…but im considering buying 2 years so i can retire at possibly 63 or 65. This wld cost me an additional £95 per month…wld this be finanically benefical?
Thanks for advise.
Dear Lynn
I am of the view that the earlier you have the ability to work through choice and not necessity the better. Based on this assumption additional retirement provision is typically a good thing. The question arises, what is the most appropriate vehicle to give you the opportunity to retire early? Added years are no longer available via the NHS and have not been for a while. There are a number of routes available including added pension via the NHS, private pensions, ISA’s to name but a few. There are a number of factors that we would need to ascetain before recommending an appropriate route. I would suggest that you seek appropriate advice before deciding and I could put you in contact with an adviser if you wish.
Kind Regards
L&M team
To Richard Major
Just received a pay slip for back payment of my pension. Money entered my bank yesterday. Persistence does pay 👏
Hi Susan, thanks for letting me know. It will be useful to bear in mind should our clients have a similar issue in the future. I am really pleased for you, it feels like the right outcome.
Kind regards
Richard
Hi, I joined the 1995 scheme in 2006 and am now in 2015 scheme, and am turning 43 this May. I was TUPE’d over to a private company in July 2013 hence my pay frozen at 2013/14 pay for (band 8A (£47,800 plus 6k higher cost London allowance). The current job allows me amazing flexibility and am staying on considering the pension benefits.
However as my salary is frozen, the value of my salary will erode over time and maybe at some point it will not be worth staying for the pension. Assuming I could get a job with at least an inflationary/cost of living increase in the private sector, at which point will it not be worth staying for pension or how do I evaluate that?
Hi,
Although the pension was frozen, it does not mean no increase. In a final salary scheme such as the NHS pension, the benefits will continue to rise, although not linked to service or pay. They aim to be protected against inflation by increasing in line with the pensions (increase) act 1971. From 1st April 2011 the increases have been linked to the consumer price index (CPI). It can depend on what measure of inflation you use, but none the less there is a degree of protection.
I hope this answers your question.
Kind Regards
L&M team
Hi, I am not a UK resident but I’ve started working as a part time locum on the NHS. I am 34 y.o. at the moment. I will be doing 2-3 months a year with an annual earning of 40-50,000 pounds. I don’t have long term plans to work in the UK but I presume that I will work like this for at least 2-3 years, so I will be eligible for some small pension. Do you think it’s worth giving nearly 10% of my pay for this period for an NHS pension. Is there a risk that the retirement age will continue to be increased?
Dear Karen
If you work on the basis that part of your earnings should be put aside for retirement provision, then the NHS pension is a good environment. As ever there are circumstances where it is not appropriate and it is alway wise to take advice on your specific circumstances.
The retirement age will move as it is linked to the state pension age, its a case of when.
Kind Regards
L&M team
My taxable earnings as an nhs consultant were £142000 after overtime ( around £155k before pension deduction) . With the pension annual allowance taper in mind , is it worth leaving the NHS scheme, at least for part of a tax year , possibly rejoining on an ad hoc basis for several months each tax year, to minimise this taper effect? I have 13 years service in 1995 scheme and over 2 years in 2015 scheme. Many thanks
Dear James,
I would need to check your calculations regarding your income. Your deemed pension contribution needs to be added back into the calculation, so you may find it higher than you anticipate. The notional pension figures can be requested from the pensions agency. The course of action you suggest is certainly an option although not one that we recommend very often, as it can have side effects. If your aim is to increase your pension then in most cases it is better to remain in the scheme. It is an area that we would normally suggest you take advice. We have constructed a system that allows us to give an indication of various courses of action that may be of benefit.
I hope this helps
Kind Regards
L&M Team
Hi Max,
I have been paying 6.8 percent of a 32,000 salary into a local government scheme for 10 years. I’m now 44. I’m moving to the NHS shortly and will be paying 9.3 percent on a salary of 38,000. It’s a fair hike in outgoings for me on a small rise, is it worth it?
Alyson
Hi Alyson
To summarise your current position: As a basic tax rate payer you currently pay £2,176pa before tax relief is granted on your local government scheme. The “actual” cost to you will be 80% of this amount ie £145pm. In the NHS scheme, the new contribution will be £3,534pa before tax relief. The “actual” cost to you will be £235pm.
Your income is going to increase by £6,000 before tax and £4,800 after tax ie £400pm. The increase in pension contribution of £90pm represents quite a chunk of this additional income as you say. However, fundamentally there are two reasons for sticking with the scheme.
Primarily, the NHS is deemed to make an employer’s contribution of 14.3%! In all my years as an adviser, I have only come across one “private” employer who has come close to making an employer’s contribution of that size. You don’t want to lose out on that contribution, even if it’s going to cost you a bit more personally to be eligible for it!
Secondly, as long as you are a member of the NHS pension scheme, your increased income of £38,000 compared to your current income of £32,000 will be reflected in a bigger pension in retirement. Surely this has to be a good thing even though it’s going to cost you a bit more in the coming years?
I hope that helps
Kind regards
The L&M Team
Hi Max,
I’m a nurse with my pension split between the 1995 scheme and 2015. I wanted to check something that I’ve been told please. I’m considering retirement at 60, taking the modest pension provided by the 1995 scheme, and freezing the 2015 pension at that point. I understand that at State Pension age, I would then start receiving the money due from the 2005 scheme on top of the 1995 payments. Is that correct? I know I’ll miss out on 7 years of contributing to the 2015 scheme but I think I’d still be getting a good pension from 67 onwards, particularly if I make Additional payments in the meantime.
Hi Julia
You are correct in what you say. You can claim your benefits under the 1995 scheme at the scheme’s “normal” retirement age of 60. You can then choose to leave/freeze/defer the 2015 scheme benefits until your state pension age of 67. You could choose to take those benefits at age 60 as well but they would suffer an “actuarial reduction”, so you would receive substantially less than if you had waited to age 67. You may be happy to suffer this actuarial reduction in favour of having a bit more income at age 60. This is obviously a really important choice/decision so think carefully!
It is important to note, which I think you are aware of, that if you draw your 1995 benefits at 60 and return to work within the NHS you cannot re-join the 2015 scheme and build up further benefits. As you rightly say, you would “miss out” on seven years of contributions to the 2015 scheme.
I am slightly confused about your comment relating to “additional payments”; if you have stopped being a member of the NHS pension scheme, you cannot make additional payments to it. Are you referring to the fact that you could contribute to a personal pension plan instead? If so, you are correct in thinking this is the case, although there would be limits on how much you could put into the personal pension.
Best wishes
The L&M Team
Thanks so much for the answer. Very helpful. The part about ‘additional payments’ was badly worded. I meant I’m thinking of making additional payments into the 2015 scheme up until age 60. So I would take my 1995 pension at 60, and wait 7 years for the benefits of that boosted 2015 pension pot. From 60 to 67, I would still work part-time to supplement my pension income. I suppose you can’t really comment too much on individual cases without all the figures but, in general terms, does that seem a sensible plan? I suppose I could start a private pension plan now at age 46 with the money that would otherwise go into additional payments, which would be more flexible. But I’m assuming that after all the charges etc, any private plan would have to perform exceptionally well to outstrip an NHS pension with 13/14 years of additional payments?
Hi Julia
You could do as you are suggesting and this would be a reasonable way of generating an additional pension. However, there are advantages and disadvantages when compared to the possibility of a personal pension plan. You would be best advised to decide on how much pension you want to buy/how much you want to spend to buy additional pension, and then make a comparison against a personal pension. Not all personal pensions are made the same! And not all personal pensions are expensive (although that is as much to do with perception as anything!).
Once you have made a comparison, you can make an informed decision based on the costs, potential performance, attitude to risk, flexibility of retirement date, the fact that the personal pension could be passed to members of your family, non-investment risk of additional NHS pension etc etc. There is a lot to consider when making these sorts of decisions and what’s right for you may not be right for someone else – it’s all about PERSONAL requirements.
Best wishes
The L&M Team
I`m 57 and have been employed by NHS since 1995 but am not in any pension scheme.Is it worth my while joining the 2015 scheme now or would I be better off opting out ?My salary is £23k p.a.
Dear Jean
Our general view is that the NHS pension scheme is an excellent scheme and you would need good reasons not to join it. There are some that it is not right for, but they are few and far between. If you have concerns about joining the scheme it may be suitable to seek advice.
Kind Regards
Max
I am 56 and have worked for the nhs for 9 years, i am now considering accepting the offer of employment from a private hospital but am concerned re my pension. I plan to work until i am 67, would i end up with a substantially smaller pension by leaving the nhs?
I would of course join my new employees scheme but understand that I cannot fo this until i have worked for them for 6 months.
Hi Hilary
The benefits that you have built up to date would remain as “preserved” benefits until such time as you wanted to take them. In the event that you leave the NHS scheme they will increase by CPI every year until the point that you take them.
The NHS is a final salary scheme and as such is typically viewed as the gold standard of pensions. It is likley that you may be moving to an inferior pension system.
I hope this helps
Regards
L&M team
Good morning,
I am from Spain, I’m 40, I have been working for the NHS for the last 3 years on a salary of aprox 50000£. Opted out the scheme for a few months (4 months) due to financial problems).
I have 2 scenarios:
1) if I go back to Spain with 4 years worked, will I be paid that money when I retired? Can you calculate how much would that be?
2) probably I come back to do locum shifts from time to time. That I am planning that will be aprox 40000£/year. Is it worth to continue with the NHS pension scheme.
I’m quite concerned in view of Brexit deals approaching that this will be not as initially promised and I will lose my money.
Thanks in advance
Hi
The contributions that you’ve paid have “bought” benefits within the pension scheme. If you leave the pension scheme then these benefits will be preserved/deferred until your retirement date, at which time you can expect them to be paid to you. (In the meantime you will be referred to as a “Deferred member”.) The benefits will have been increased annually by CPI.
It is worth rejoining the pension scheme, whenever you are able, in my opinion, on account of the fact that the NHS employer is deemed to make a contribution to your pension of 14.39% (currently). The combination of employee and employer contribution is one of the reasons why the resultant Nhs pension benefits are still considered to be generous.
I do not feel that you should be concerned about losing the money that you have paid in. Regardless of Brexit, you have effectively paid into a scheme that is state backed and whether you are a foreign national or British, you can expect to receive a pension.
Have searched in vain for an answer to this question and wondered if you might be able to help. Can I stop paying into the 2015 pension and continue with just my 1995 pension Added Years contributions?
Hi there
No, it’s not possible to leave the 2015 pension scheme and just continue with your added years contributions.
Best wishes Owen
Hello Max,
I am a member of the 2015 scheme, transferred over to it at its inception.
Please would you confirm whether the “revaluation” of each year of service’s “pension earned” is cumulative until retirement or whether the “CPI plus 1.5%” uplift is only made on the original amount earned for each year?
Thanks very much.
Hi Gillian
You are in the 2015 (CARE) NHS Pension Scheme. This is a CARE (career average revalued earnings) scheme that has an accrual rate of 1/54. As you state, as a contributing member, benefits are increased by CPI + 1.5% per annum.
As an example:
* Let’s say that you earn £65,000 in pensionable income this year and the CPI rate is 3%.
* Your pension would be 1/54 x £65,000 = £1,203 and it would be increased by the revaluation rate (CPI 3% + 1.5%) to £1,452 at the end of year 1. At the end of year 2, assuming CPI stayed the same, then this amount would increase by 4.5% again, to £1,517.34. This process would continue until retirement and is applicable to each individual year’s earnings.
In other words, the pension is cumulative.
I hope that helps.
Best wishes
Owen
Hello,
I joined the pension scheme in 2007 and bought added years on 1995. I have no idea when I would like to retire!
I am now a Consultant and my contributions to the added years are hefty – doubled since being a ‘junior doctor’ in August. I work out using 1995 calculators that on current figures I’d get an extra 11k lump and 3k/year at 60 for 58k of contributions over the next 25 years, taking me at least 13 years to break even – I’d be 80 if I took retirement at 67!
Could a private pension or investments/savings better this? Or are the additional years still a good bet?
If so, do you have advisers I could book an appointment with?
Regards,
Greg
Hi Greg
The added years are a percentage of earnings. The difference being as a junior doctor your on call was not superannuated, therefore the payments would be less and your pension based on a lower income.
I would probably call into question your calculations as they are based on current figures. We would need to do projections based on your future earnings. We have a calculator that takes various scenarios into account and we could run this with and without added years. This may provide you with better figures to base your analysis on.
Please feel free to give me a call on 07760 266340 or email me at owen@legalandmedical.co.uk
Best wishes
Owen
Hi there,
I joined NHS pension scheme in August 2001 for 8 years till August 2009. My salary was 46500 when I left.
I worked as a locum with no pension scheme for few years as I did not know that I could have continued to pay.
I joined the 2015 NHS pension scheme on 4/12/16. My annual pensionable salary is 70000.
I am planning to retire at the age of 60 years.
Is it worth continue with the scheme as I am paying almost 10000 a year (13.5%).
Is there a way add the new service to the old one. The break was for more than 7 years.
Hi Mohammad
The benefits that you accrued up until 2009 are likely all to be 1995 scheme membership benefits – these are potentially available at age 60 without actuarial reduction.
You are paying a gross figure of 13.5%. You receive tax relief at 40% on this amount so in effect you are only paying 8.1%. Your employer is deemed to be paying 14.38% – the major reason why you would never leave the scheme and certainly not in your position, when you hope to retire at 60 but have significant gaps in service.
You don’t “add” service together, as such, you accrue service under each section of the pension scheme. Benefits are available without actuarial reduction at the normal retirement age for each scheme (age 60 for 1995 scheme and state pension age for the 2015 scheme). If you take your 2015 scheme benefits at age 60 then you will suffer an actuarial reduction which will be significant.
I hope this helps.
Best wishes
Owen
Dear Owen,
If I retire at 60 years. I would take the full 1995 pension. Then if I stop paying into the 2015 pension; but not cash it till the state pension age. would I still loose significantly.
Hi Mohammad
You could take that course of action. Your 2015 scheme benefits would suffer no actuarial reduction if you deferred taking them until State Pension Age (SPA) but obviously they would be significantly less than if you had been in a position to be allowed to/able to continue paying pension contributions to the 2015 scheme between age 60 and SPA.
Best wishes
Owen
I am 30 and currently on £42,000. My contributions are 9.3%.
I am looking to join the 2015 scheme and see that you accrue 1/54th of your pensionable pay. This is the same across all employees however contribution rates vary.
Therefore my question is, is the contribution rate simply a type of “membership fee” in that it doesn’t matter how much you contribute, you will always actually pay into the pot 1/54th of your annual salary?
Many thanks
Sorry just to add…I just read about the revaluation.
For example Year 1 (2017) – if the revaluation is 2%, this factor is added at the end of year. For the year 1 pot, is the pot then multiplied by the factor every year for the duration of the pension? Or will it be multiplied by the factor for each corresponding year (i.e if 2018 is 3% – year 1 pot and year 2 pot multiplied by the 3% factor?
Hi Dipak
All “pots” are multiplied by the cpi factor for each individual/corresponding year, not the same factor as applied in “year 1”.
Best wishes
Owen
Hi Dipak
You don’t pay in 1/54th of your annual pay, you receive 1/54 of pensionable pay for each specific year. Your contribution varies depending on the amount you earn (income is “banded” and a contribution made dependent on the banding – the more you earn, the more you will contribute, up to a maximum of 14.5%). I hope that helps.
Best wishes
Owen
I have been a member of NHS pension (2008 section) since Oct’2012 ( with contribution of 5.7%) and now in 2015 section. Current contributions are 9.3% . I am not sure how much will I be getting back in the future, though there is no plan for exiting this scheme. Provided i will be contributing till 68 and with the NHS, can you provide me a link or a calculator as to how much will be my annual income after i retire.
Hi Amit
It’s very difficult to give you a figure. Your eventual pension is based on your career earnings. For lots of reasons (part-time working, early retirement, speed of advancement etc etc), it will be difficult to predict your career earnings and therefore your pension income in retirement. To give you some idea, I could refer back to the old pension scheme; typically a doctor who had worked full-time since qualification would receive approximately 40%-45% of their final income (assuming that was the greatest) as an annual income. The pension scheme has changed significantly but I feel that this sort of figure is probably achievable at retirement.
Best wishes
Owen
I worked for the NHS from 1978-1987 and will receive a pension at age 60 of approx £1800 plus approx £4000 lump sum. Is it possible to cash in the pension pot rather than draw a pension, as with personal pensions?
Hi Christine
No it’s not possible. Other than in exceptional circumstances (terminal illness), it is impossible to take the pension in any other way other than a lump sum and income. However, you can commute (exchange) income in favour of a bigger lump sum. There are limits but if you ask the NHS to tell you what the maximum lump sum is with a reduced pension, they will be more than happy to do this.
Best wishes
Owen
These examples are all good for managers/Doctors/psychology etc but most Occupational Therapists, other AHPs and nurses don’t earn anywhere near your examples. Realistically your looking at £38000, with a promotion of this being part-time for childcare reasons, give us an example like that!
Hi Katrina
Many thanks for your comment. Whilst there are a number of NHS specialisms, we ourselves specialise in advising doctors and dentists which is reflected in the examples used in this blog post.
Best wishes
Owen
Hi
I am a 55 yr old GP partner and have been paying added year for over 10 years and would be grateful if you could inform me if added years are considered a good financial option compared with a Personal Pension such as a SIPP ( are they similar to the main pension in terms of return on investment) . I realise that it is now possible to cancel ongoing payment into added years. I have been told by our accountants that I have no concerns about going over my lifetime allowance (as I have had a longish period of time out of the nhs pension in the 1990s)
Thanks for any information/advice
Hi Rob
Added years were deemed to be “expensive” by some, but can represent reasonable value for money when one considers the change to prospective retirement age, their non-investment linked return, inflation proofed income, spousal/partner benefits, etc. The list is long! They are not without their issues either. You mention lifetime allowance but you also need to consider the annual allowance. They could cause further tax liabilities which can impact on their value for money.
Suitability is very much in the eye of the beholder! As such, I would strongly suggest a meeting with one of the Legal & Medical advisers so that you can take an all-around view of your finances and establish whether or not added years fits with the rest of your financial approach/portfolio.
Best wishes
Owen
Hello
I’m 45 years old, a doctor working in NHS for five years but opted not to be in the pension scheme. I have a private pension in Spain but have not done regular contributions to it due to financial reasons.
Now, I’m earning around £65000 a year and I am just in a position to do monthly payments regularly but would like some advice about better to opt in to nhs pension scheme or continue out and pay my private pension. I think when retired would go back to Spain and my idea is to do that around 61-62 y.o.
Hi
My advice would be to join the NHS pension scheme. The main reason is that the benefits accrued, even if you retire early at 61-62, will still be significant, non-investment linked and offer other benefits like indexation, spouse/partner pension, dependants pension, etc. However, to make a final decision would require a one-to-one meeting to consider all your current financial details.
Best wishes
Owen
Hi
I know this post is mainly for Doctors and Dentists but I would like to ask a few questions please.
I am an IT Engineer who has recently joined the NHS with a yearly salary of £26565, currently in the 2015 pension.
On my understanding as an example if I paid as much as a years worth of pension payments which would be 1/54 of my salary which I work out £491 a year without the CPI, would that mean that I would get £491 per annum when I retire until I die or only for one year?. As it seems everywhere i read this seems the case that one years payment into the pension means I will get the above every year?.
Thanks
Hi Paul
You don’t pay 1/54 of your salary. You pay a fixed percentage of your annual income depending on salary (this percentage ranges from 6% to 14.5%). You then receive 1/54 of each year’s pensionable pay for each year in the scheme. Each year’s figure is revalued annually up to the point of taking pension benefits.
Dealing with your figure for one year: £491 will be revalued every year up until retirement so it will be significantly bigger at the time of retirement. This process is applied to each year of pensionable income. When you get to retirement you will have a cumulative pension based on all your years of individual “re-valued” yearly pension amounts.
I hope that helps.
Best wishes
Owen
Thanks for your reply Owen it’s greatly appreciated.
If for example i left the pension scheme after one years contribution at £491 and never re-entered would i get £491 plus interest accumulated over the years, then when i retire get a continuous pension payment of £491 plus interest every year, until I die?.
Obviously I will be in longer but I wanted to keep it simple as an example.
Thanks again
That’s absolutely correct Paul. Whilst in payment the pension also increases by cpi. In the event of death, your remaining partner/spouse (if applicable) would receive half of your pension until the end of their life.
Hi I have 16years frozen in the 1995 scheme and I opted out of the 2015 when it came in as my intention as always been to retire at 60. The new scheme attracts large penalties if withdrawn at 60. My annual salary is 38000, I have been considering a private pension to top up my pension at 60. Would it be best to do this or pay the 2015 scheme and take the hit of charges from taking it early? I am currently 40yrs.
Hi Emma
You could take your 1995 pension benefits independently of the 2015 scheme benefits but this would preclude you from contributing any further contributions to the 2015 scheme. This may suit your personal circumstances in relation to income required at age 60 for instance. You could then leave your 2015 benefits until 67/68 or until such time that you felt it was worth paying the penalty to access the 2015 benefits.
With regards to a personal pension versus the 2015 scheme, it is very much down to your individual circumstances and you should speak to a financial adviser before you make a decision and take any action. The NHS pension scheme benefits from an employer contribution of 14.38% of your income, has no investment risk, provides guaranteed benefits for you and potentially your loved ones. The personal pension is more flexible and can provide benefits from any age after 55 (being increased in coming years).
Best wishes
Owen
Hi
How does the employer’s contribution affect the pension if the pension I will get for any given year is 1/54 of my pensionable pay for that year?
Hi Cor
The employers contribution (deemed to be 14.38% of superannuated salary) plus your contribution “allows” the scheme to be as generous as it is ie to give you 1/54th of annual superannuated salary for every year served. In addition, as you are probably aware, there are other multiple scheme benefits. These sort of benefits are expensive to provide, hence the requirement for a large employer contribution. If the employer didn’t make the contribution then you would get nothing like a 1/54th scheme probably a 1/108th scheme….if you were lucky!!
Best wishes
Owen
Thanks for the explanation Owen.
I work as a dentist but I am paid an hourly rate. My NHS superannuation has historically been related to my NPE and this is related to my contract value ie: not what I am actually paid. I am paid much less than the contract value and my principal has now decided to reduce the amount of superannuation that I get even though I won’t be working less hours. I he legally able to do this?
Hi Stephanie
As your question is a legal matter and one that we cannot comment on, I would suggest that you approach a representative body such as the BDA and see if they have an opinion and/or advice.
Best wishes
Owen
I must be misunderstanding this all somehow. Perhaps you can help? I earn 50k (aged 28 with 7 years NHS pension contributions). Under the 2015 scheme, I am paying 12.5% and my employers, the 14%.
From what I understand, my ‘pot’ only gets 1/52nd of my annual salary each year (so £961.54) but I’m paying more than that in just two months’ worth of contributions. Where does my employer contributions come in to this? How is this worth me remaining in the scheme.
As I said, I must be misunderstanding?!
Hi Amy
Firstly, don’t forget that you pay 12.5% gross but receive 40% tax relief on the pension contribution so the actual contribution is 7.5%. The NHS Pension Scheme is also a 54ths scheme so it’s 1/54 not 1/52.
Each year you add an amount to your pension pot and this amount is inflated annually by the respective indexing factor. By the time you get to retirement, you have 40 years (for example) of annual amounts in your pot; all of them inflated over the years. Using your figures, if you work out your total net contribution over the 40 years, your pension could be around £350K – £400K, equivalent to an annual pension of around £60,000 pa.
When you think that the NHS Pension Scheme provides indexed benefits during retirement, a potential tax free lump sum at retirement, widowers and dependants pension(s), ill-health retirement pension if necessary, etc, you don’t have to survive that long for your pension to represent amazing value for money! The employer’s contribution is one reason why the benefits are as generous as they are. Without it, there is no way the benefits would be what they are.
As this is a very complex area with many factors to consider, I would strongly advise a meeting with one of our Legal & Medical advisers to talk things through.
Best wishes
Owen
Thank you so much for your response. Sorry if I am being really dense here. Why do I get 40% tax relief on the pension contribution? Amy
Hi Amy
The government essentially incentivises individuals to save for their retirement by offering tax relief (at their highest notional rate of income tax) on pension contributions. Contributions to occupational pension schemes like the NHS are treated no differently, although you receive full tax relief “up-front” on the pension contribution. If you examine your payslip, you will see “taxable” pay and “pensionable” pay. The two are different and this will, in the main, be down to the fact that your taxable pay is lower because of the pension contributions you make.
Best wishes
Owen
Hi i am a 23yr old nurse and have been paying into the 2015 nhs pension scheme. I currently earn £23,597 (not taking into account this new agreed pay scales). I am thinking of opting out my pension because i do not like the idea of working till 68 years of age before i can take any payment from my pension otherwise if i take it earlier i will be penalised. I do not wish to work till i am 68yrs old and worry this age will increase when i come to retirement age. Also if i do wish to reduce my hours from full time to part time as i get older it is my understanding this will also affect what pension i get each month? Also do you ever really get back what you pay in for example if i retire at 68 and im currently 23 i will have paid in 47yrs worth of payments into my scheme? Any help is appreciated! Thanks
Hi Caitlin
You can access your pension “early” before the age of 68. “Yes” your pension will be less than if you had waited until 68 but the reduced pension may be acceptable to you. Your employer is deemed to contribute 14.38% of your income to your pension. It is the combination of this contribution and your own which results in the impressive pension benefits that the NHS provides.
You receive tax relief on your pension contribution. Based on an income of £23,597 you contribute 7.1% ie £1,675pa. However, you only pay 80% of this amount because you receive basic tax relief at source. Once this is taken into account you actually pay £1,340pa/£111pm.
If you work part-time you still make contributions to the scheme and still build up benefits. Those years that you work part-time will be reflected in a smaller pension in the future – but it’s a pension still worth having!
Finally, will you get your money back once you arrive at pensionable age? Absolutely! If you were to assume that you stayed in your current role for the rest of your career and multiplied the contributions above by 30-40 years and compare that to the likely pension you will receive, then this would confirm that the NHS Pension Scheme is still a great pension scheme!
I would advise you to stay in the scheme!
Best wishes
Owen
Hi,
I need your help. I’ll be 30 this year and had been working in NHS for a hear and 6 months. Annual income of 23,023, but p60 last year shows 31k total earnings. Currently, I’m paying 9.3% of my pension.
I am really planning to retire early, maybe 55. And Ive read something that Im only getting 55% of my supposed pension.
Can you help me to figure out:
a. How much is my projected lumpsum
b. Pension every month
c. And if its still worthy to be in the pension given that I plan to retire early.
Thank you very much
Sa
Hi Lexie
The earliest you will be able to claim benefits from your pension scheme will be 57/58. Early retirement at 55 is currently allowed for some individuals, based on their current age now.
You can get an idea of how much you will receive as a pension by getting your Total Rewards Statement. This is produced by the NHS and updated in August every year. The link to get you started is https://www.totalrewardstatements.nhs.uk/Login
As for being “worth it” – even if you retire early, I still believe that the NHS pension represents good value for money and individuals should remain members in almost all scenarios.
Best wishes
Owen
I am 43. i stayed in the 95 section for 10 years, and was moved to the 2015 section.
I would like to purchase additional pension, but am not sure if I can purchase additional pension for the 95 section?
i do not wish to work in the NHS until i’m 67, and would like to maximise my pension from age 60.
Hi Nathan
You can purchase additional pension but NOT in relation to the ‘95 scheme. The additional pension is inherently linked to normal retirement age so I would definitely review your options with an adviser before going ahead with this. An additional Personal Pension which offers more flexibility with regards to retirement age (but potentially more risk) may be suitable. But again, it is imperative that you discuss this with an adviser because things can get complicated!
Retiring at 60 is possible – there are pension ramifications but not necessarily insurmountable/retirement limiting. You may have to consider additional investments and look at the NHS pension as part of your overall retirement strategy.
Give one of our offices a call and they will be able to put you in touch with me or one of our other advisers to arrange an appointment and talk through options.
Best wishes
Owen
Hi
I worked for the NHS from 1987, started as a Student nurse in a long stay Learning disabilities Hospital. I then worked my way up and ended up a Lead Nurse in London. I completed nearly 20 years of service, then left to work in a private company.
I had the Mental Health Officer status that previously allowed me to retire at 55. I am now 52 and wish to retire in less than 3 years time when I reach 55 years old.
Could I still retire at 55 and get a lump sum and a monthly pension without penalties?
Hi Henry
I am assuming that you have been out of the NHS for more than 5 years and don’t intend on re-joining. On this basis, you do not retain the MHO status. Retiring at 55 will therefore attract an actuarial reduction in pension benefits.
Best wishes
Owen
Hi,
With the recent pay rise I have actually received a pay decrease. This is due to pension contributions outstripping the rise.
I am a part time worker (30 hours) but pay as if I am full time (so 14.5%). My understanding is that on retirement I won’t be pensioned as though I have paid in full time even though my contributions remain the same as a full time worker. Please can you explain if this assumption is accurate as it seems highly discriminatory to part time workers (which are generally female and for childcare reasons). Best regards
Hi
Can I suggest a meeting with one of our advisers. It sounds to me like you may be of an age that makes you a member of the 1995 scheme and potentially, also the 2015 scheme. Your pension contributions, as you correctly state, will be based on the Whole Time Equivalent (WTE) salary. However, your 1995 scheme pension benefits are based on WTE so this seems a fair exchange. The 2015 scheme does seem to discriminate because, as you correctly state, the contribution rate is based on the WTE but the pension benefits are based on a lower salary that actually currently falls into a different contribution “banding”.
Ending on a positive note – the employer still makes a large contribution towards the pension and you receive tax relief at your highest notional rate on pension contributions.
Best wishes
Owen
Hi
I have preserved benefits in the 1995 scheme. Ive recently looked at the new TRS statement and the annual pension is only 1% more than last years, is there a reason why they wouldnt be showing the CPI added on or was last years only 1% ? Thank you
Also, i am led to believe i can continue to contribute into my 2015 scheme after i draw my 1995 scheme at 60, simply because i had a break in my 1995 scheme of more than 5 years, please could you confirm, thank you
Hi Victoria
Your question is fairly complex and I would encourage you to meet one of our advisers to discuss it in person. What makes things more difficult is I don’t know your age, years of membership (F/T and P/T split etc etc) and therefore I am a little wary of giving information that may be inappropriate because I have to make assumptions to give an answer.
In my experience deferred benefits don’t seem to increase on the TRS by anything other than the applicable salary increase. It’s almost like the system can’t cope with the CPI figure so I wouldn’t be unduly concerned.
Regards your ability to continue contributing to the 2015 scheme after the age of 60 (at which point you intend to take your ’95 benefits); put bluntly – “you cant/you wont”….unless you make an unusual/unlikely decision later in life.
This NHS factsheet (pg 5) confirms that you can’t make further contributions unless you have had a break of “pensionable employment” (not a break from the ’95 scheme) of more than 5 years AFTER April 2015.
I am assuming (that word again) that you are currently contributing to the 2015 scheme. However, as this NHS factsheet confirms, you could start making contributions, if you went back to work, 5 years after stopping pensionable employment. (If you took 24 hour retirement and went back to work then the work is no longer pensionable because you’re not allowed to make contributions).
If this was at age 60 you could go back to the 2015 scheme and contribute for another 2 years from age 65 to the 2015 scheme retirement age of 67. This seems counter-intuitive and I am assuming that you are unlikely to follow this course of action.
Best wishes
Owen
I have an NHS salary of about £80000 p.a which is a mixture of salary (£50000), and overtime(£30000). Do I need to contact HMRC for tax relief on pension contributions above the basic rate, or is this done at source when the pension is taken from my salary?
Hi Harry
Because you are a higher rate (40%) tax payer then you claim the additional tax relief that you are due (20%) through your self-assessment tax return at the end of the year. As a 40% tax payer you should complete a tax return every year, up until the point HMRC may send you a letter stating you no longer need to complete a return because your situation seems to be the same every year.
Best wishes
Owen
I have 28 years contributions in the 1995 scheme. I will be able to take my pension in febuary aged 60years and return full time until I am 66. Is it worthwhile doing this or staying in until I am 66years. I work in maintenance and there are rumours we will be privatised next april.
Hi Stephen
In the event that you take your ‘95 benefits you won’t be able to contribute to the 2015 scheme (thereby building up benefits in this scheme) when you return to work.
For you it becomes a question of lifestyle and affordability; taking the pension and continuing to work full time will see your income increase overall. You also won’t be making any pension contributions which is another factor that increases your overall income. Plus, you will receive a tax-free lump sum upon taking benefits.
You have to measure these “immediate” increases against your willingness (or not) to NOT taking the ‘95 pension benefits, continuing to contribute to the 2015 scheme and increasing future benefits.
I’d recommend seeing an adviser to discuss your future aspirations, familial situation, income requirement, health etc etc. All of these factors should be factored in to your eventual decision.
Best wishes
Owen
hi
I joined the nhs pension last month,october 2018, my annual salary is 30000 and I intend to work untill 65. I am 44 now( born in 1974). How much will I get per year when I retire?
Hi Armanda
This 2015 NHS Pension Scheme Guide explains how your pension is calculated using a 1/54 accrual rate in the 2015 scheme (Pg 4).
Best wishes
Owen
I am joining the NHS pension and would like to transfer my current pension pot estimate in £56.000 to the NHS one. Do you know many years this is worth of NHS years? And is it worth doing that? I am 49 and want to stay in the NHS until retirement age.
I would appreciate any help.
Hi Jorge
It is worth considering transferring scheme benefits from one scheme to another but only once you have considered future aspirations, a requirement for flexibility or not (as the case may be), what service the receiving scheme is prepared to credit you with in the event that you transfer benefits, when you can access benefits, etc. The starting point is to apply to the NHS to find out what they will give you.
This NHS Pensions – Transfer in Guide and Application Pack is also a useful guide to transferring benefits into the scheme.
Best wishes
Owen
I am in the NHS scheme since 2010. I am 33. I am a part time salaried GP earning £40000 a year, although I contribute 13.5%( I think it is based on full time equivalent).
Now, I plan to do pure GP locum work and wonder if it is still a good idea to continue contributing. I will need to pay my own employer and employee’s contribution( I get the whole sum paid to me). I estimate my yearly income may be around £50,000, probably higher to up to 60000. With new tax bands for 2019-2020 with higher tax after £50,000, I will not get much of a ‘high tax relief’. Plus I feel saving the money towards paying off my mortgage may be better than getting a massive sum after 67 or 70 when I retire.
Or, if I come off the pension scheme for couple of years and join back within 5 years, I hopefully may get something out of it when I retire?
I just feel it is unfair to contribute so much towards the pension, when you have big debts to pay off when you are younger( mortgage, children’s education etc), when you can only enjoy the returns when you are senile, provided you have not burnt yourself out. Or just to get max returns on what you contributed, you are forced to work till you perish! And with news of healthcare professionals dying early from stress related conditions…
Hi Nicholas
I understand your sentiments regarding the level of contribution. However you do not pay an employer contribution just an individual contribution.
At the level of income you have described, I think it’s fair to say that you will get higher tax relief on your contributions.
As for leaving the scheme – that is a big decision and therefore I would strongly recommend that you speak to an adviser to give an objective view.
Best wishes
Owen
I am in the middle of a divorce. My partner has a very large NHS pension worth over 1 million which he is currently drawing. I have a small NHS pension worth around 250K and aim to retire a year in April. Would there be any benefit to us buying 4 extra years of my pension (I already have 1 extra year) at a cost 75K, to be put into our pension pot and divided. Basically what is 4 extra years worth in real terms – hopefully a lot more than 75K ? Thanks
Hi Alison
This is a complex question I’m afraid which would definitely need a meeting with an adviser. Whether you are in the ‘95 scheme or the 2015 scheme, or both, may have a bearing. The number of years that you have overall, is this potential early retirement, what other sources of income do you have etc etc.
A simplistic way of looking at this which I wouldn’t necessarily advocate is to look at the likely increase in annual income that you stand to gain for an input of £75,000 and decide whether you are likely to get that much back over the coming years.
Best wishes
Owen
Hi, I am 63, have worked full time in NHS for 5 – 6 years. A payrise and annual increment has resulted in my gross pay increasing by £1030 since this time last year . However, that has also taken my gross salary just £100 over the upper limit for 5.6% contributions, so I now pay 7.1%. This means my contributions have gone up by over £30 a month to £127.89. On my pay of just over 21,500 per year, that is a significant amount to be taken from my pay, especially as I am single – so I am wondering, given that I haven’t worked in the NHS for very long and won’t have built up much of a pension with it by the time I retire, is it worth while staying in the pension scheme ? I don’t expect to be able to retire at 66 – how long would i need to be in the scheme to make it worthwhile?
Hi Zelah
I would advise you to get your latest TRS statement – that will inform you of what your current benefits are. You can always access pension benefits before the normal retirement age (NRA) although there would be a reduction in benefits if you were to do this.
It does seem unfair that the rate of contribution goes up to a different band when you only receive a small pay-rise, but the banding has to start somewhere unfortunately! You receive tax relief at the basic rate on your contributions, so the actual contribution that you pay is as follows:
£21500*7.1%=£1,526.50pa before tax relief. After tax relief, this figure is £1,221.20pa – this is what you physically pay.
Increasing pension benefits within the scheme is worthwhile in most cases, so I would encourage you to stay in and then maybe consider taking your benefits early if you really feel that you are ready to retire before the age of 66/67.
Best wishes
Owen
Hi,
I am 42 and a full-time GP partner. I pay 28.3% of my income in 2015 NHS pension scheme. My retirement age will be 68 (as it holds currently) and the pension pot will not be transferred to my children in case of my death.
Is it worth staying in NHS pension or look for a private pension as many of my colleague have done?.
I have paid into NHS pension in the lat 10 years ( 4 years as self employed, rest as employed).
Hi Fahad
I understand that a significant amount of money is going into the NHS pension, especially as a GP partner. However, things to consider include:
– Firstly, the pension will be available to you before 68 – probably from the age of 58. Yes there would be an actuarial reduction, and you would receive less income as a result, but there is some flexibility.
– If you were to die, your children would be entitled to a quarter of your pension until age 23.
– Your spouse/partner would be entitled to half your pension at any time after your death assuming you pre-decease them.
I would talk to an adviser before making a decision like leaving the scheme. I would, in fact, probably encourage a practice meeting to talk through the pros and cons with your partners/colleagues/adviser. Multiple heads are often better than one.
Best wishes
Owen
I joined the NHS pension scheme after qualifying as a registered nurse in 1997 aged 28 and a few years later decided to use the buy back ‘added years’ scheme which a colleague advised me was best option at the time, and I ended up purchasing maximum added years which equated to approximately 7 and half years to make full 40 years because I had also transferred I a previous employment pension as well.
I remained in 1995 scheme and I understand my official pension age is 60. My question is that I am 50 this year and want to know what exactly will I be entitled to at 60 I.e full NHS pension plus my added years paid in, or do i only get a fraction of this until my SPA?
The added years are quite expensive when I look on my payslip and wanted to ask if they are value for money.
Regards
Gordon
Hi Gordon
The best way of establishing future benefits is to look at your Total Rewards Statement and extrapolate from there.
With regards to value for money, there have been varying views on the cost effectiveness of added years for years and years now. What I will say is that they are a contact to provide fixed benefits at the age of 60 which is currently at least 5 years before what is now the “normal” retirement age. This in itself is a valuable benefit!
Best wishes
Owen
I’ve just started working part time for the NHS Professionals. I understand that I can contribute to a pension – but is it the same as the NHS Pension – is it worth contributing to, or looking around and finding a private pension?
Before starting work for NHSP, I’ve worked in different countries on a self employed basis, so my pension history is very patchy and poor.
Hi Bridget
As far as I am aware “NHS Professionals” offers a stakeholder scheme which is not the same as the NHS pension scheme. However, the employer will make contributions to it but I’m not sure at what level. With this in mind, it’s certainly worth considering joining. I would recommend that you need to get some more information before making a final decision.
Best wishes
Owen
Hi there
I have worked in the NHS since 1996 contributing in all three schemes. Recently I checked my total pension value which was £760,000.
Although as you can see while I had a successful career, my marriage falutered and I divorced. I had to pay my ex wife roughly 250,000 from my pension pot so that as per law parity could be gained. She worked in the nhs as long as I did but did not contribute as much.
I continue to contribute 14.5 % into my pension pot at roughly 550 pounds per week. I have two questions
1. Based on my present contributions how long will it take me to reach a million pounds if my pay and contributions remain unchanged.
2. At retirement age of 67 what can I expect in lumpsum and annual pension..? Will I be penalised for exceeding the pension limit?
3. I’m now 50, would you advice me to continue paying into the pension? At what age should I stop? Is the maximum limit 1 or 1.25 million before penalties?
Thank you
Hi Brian
Your case is complex and would form a substantial part of a full financial review which, in turn, would require a significant input of adviser time. Can I suggest you call the office and book a meeting with one of our advisers.
Best wishes
Owen
I am in a quandary on where I will be in 3.5 yrs at 60 and hoping to retire! I am confused after endless research online re the 1995 versus 2015 NHS pension. Hopefully you can explain in layman terms what it means for me?
I am 56yrs 5 months and have 18 years in the 1995 pension, I am due to go into the 2015 pension in October 2020 (tapered protection re my age). I am wanting to take my 1995 pension at 60 and take ‘the hit’ of a 31% reduction in my 2 years 2 months of 2015 pension. I am working on the principle 2 yrs 2 months contribution won’t have too much monetary value? My last pensionable pay 18/19 was £51,165.
I am confused owing to my tapered protection and transition period, what will my two pots look like and which pensionable pay will be used to calculate my final pension, the end of 19/20 or 22/23 when I retire?
Any advice would be greatly appreciated
Julie
Hi there
Can I suggest that you see one of our advisers.
You can take your ’95 benefits at age 60 but you are then precluded from contributing to the 2015 scheme. The pension will be based on the best of the last three years and the number of years service.
The 2015 scheme is a career average scheme so nothing like the ’95 scheme. Put simply, you achieve 1/54th of your pensionable pay for each year that you are in the 2015 scheme. However, if you retire “early” (pre-age 67/68) there will be an actuarial reduction and benefits will be reduced accordingly.
There is a lump sum associated with the ’95 scheme and the payment of this may mean that you can clear debt/mortgage etc. This may lead to different decisions in the same way that maybe working P/T beyond 60 may actually be attractive. These are all big decisions and as alluded to above – you should take advice.
Best wishes, Owen
I am due to officially retire aged 60 in April 2020 and am a deferred member of the NHS 1995 Scheme. If I decide to take my pension now, about 8 months before my official retire date – would I incur significant financial penalties affecting my pension payout?
I feel with the present prevailing political uncertainty, and, for example, just hearing about a proposal by the present government to raise the State Pension age to 75 – anything could happen!
Perhaps it would be better to incur I slight financial pension reduction long term to access my pension now sooner rather than later and have it safely on my bank account.
Hi there,
The abatement factors for drawing your pension early can be found in the NHS scheme members guide.
Although it is not beyond the realms of impossibility it is highly unlikely that they would be able to alter the scheme in such a short time period. Any changes they make, typically have a lead time.
Best wishes
Owen
Hello.
Thanks for the worked examples and replies.
I am a dentist who was working full time NHS in the past. Your examples rely on the protagonist’s income being the same or increasing during their time saving into the NHS pension schemes.
Unfortunately this is now not the case for most dentists.
I have a £200,000 pot in the old 1995 scheme and a smaller £17,000 pot in the 2015 scheme.
I am due to retire in 15 years, but my NHS pensionable pay is now very low as i mainly see private patients.
As i see it, my final NHS salary will be very low ans therefore my 1995 pension will be very low despite the pot i have built up.
Due to dentists having fixed contracts, i can’t just work entirely within the NHS in my last year to boost my pension like dentists used to do, but also transferring the 1995 pot to the 2015 pot will also not increase its payout as it is based on yearly contributions.
Can I :
1. Still claim a 25% tax free lump sum from the 1995 scheme and then resign myself to a low annual pension payout.
2. Transfer a cash equivalent value to the dedined contribution 2015 scheme and then transfer this pot to another scheme.
3. Start saving into a private pension or SIPP as basically i am boned!
Thanks.
Hi there,
Thank you for your comments and questions. You are in an interesting situation and for this reason, I would encourage you to meet an adviser as there is a lot to consider!
1. 25% tax-free lump sum does not apply to the ‘95@ scheme. You will receive a lump sum of three times your income. However, you do have the opportunity to “give-up” (commute) income in favour of more of a lump sum – there are maximums in place with regards to this approach.
2. CET (Cash equivalent transfer) is not allowed with NHS pension scheme benefits.
3. A personal pension could be a good way of increasing future pension benefits and receiving tax relief on the contribution. You need to be aware of by what amount your NHS pension is increasing year on year, as this will restrict the size of contribution that you can make towards a private arrangement.
It would most advantageous for you to consider talking to a financial adviser who will be able to talk through your best plan of action.
I hope this helps!
Best wishes, Owen
Hi. I am not a uk citizen and still not sure that I will stay in UK. I just started a 1 year fixed term job. Basic 40000 and 20000 overtime. I am 31.
How much I will get if I opt-out? (approx.).. and should I?
Note: My country is not in the list of the countries which I can transfer pension to.
Thanks for all the help
Hi there,
There are standard contribution rates for NHS employees joining the NHS pension scheme. I’ve attached a helpful link below.
NHS Pensions – Cost and contributions from 1 April 2015 to 31 March 2021
You will have to decide whether you feel it is worth joining the pension scheme, taking into account your future plans and therefore if retaining the contribution within your pay-packet is preferable, or not, to build up pension benefits within the NHS pension scheme.
Best wishes
Owen
Hi. I am a 40 year old band 6 therapist but for health reasons I only work 4 days a week which obviously reduces my NHS pension contributions. However because my expenses are relatively low I am able, and would like, to pay in extra lump sums and or contributions to enhance my future pension. I may also wish to retire earlier than my current pensionable age of 68. I know I can pay additional contributions to lower my pension age to 65 but in addition to that I would like to contribute further lump sums or contribution amounts. Am I better off ‘purchasing’ additional NHS pension amounts or investing in a MPAVC?
Hi there
I really think you would benefit from talking to a financial adviser, these are big decisions. Any additional contributions linked to the NHS will give you guaranteed benefits but could be considered inflexible. Contributions to an AVC will be exposed to investment risk so you could get more or less in the way of benefits, but could be considered as more flexible.
In addition to these approaches, you could use a personal pension that works similarly to the AVC (in that there is investment risk) but it does allow you to broaden your investment and/or provider away from the AVC providers – Standard Life and Prudential. However, as I have said, you are potentially making decisions that I feel would be best made with the involvement of a financial adviser.
Best wishes, Owen
OK thank you but my concern is that financial advisors will not have a full knowledge of NHS pensions and might favour AVC because that is what they are used to ‘selling’.
I joined the NHS pension scheme after qualifying as a registered nurse in 1997 aged 28 and a few years later decided to use the buy back ‘added years’ scheme which a colleague advised me was best option at the time, and I ended up purchasing maximum added years which equated to approximately 7 and half years to make full 40 years because I had also transferred I a previous employment pension as well.
I remained in 1995 scheme and I understand my official pension age is 60. My question is I was looking at purchasing additional NHS pension and will I only be able to receive this according to my 2015 retirement age without accruing any losses. I was looking at purchasing an amount over 8 years to take me to my normal retirement age of 60 under the 1995 scheme or am I thinking incorrectly. Also what are your views on buying additional NHS pension is it worth it, especially given my age at 51?
Regards
Gordon
Hi, Gordon,
Your question is complex, so I would recommend discussing this with a suitable IFA.
In general:
If you are still purchasing added year’s then this should continue to happen. The recent court case brought against the government and the transitioning of NHS pension members from the 1995 pension scheme, to the 2105 pension scheme may mean, for you, that effectively you could have/should have remained a member of the 1995 pension scheme. Meaning that you actually could have been a member of the 1995 pension scheme to the age of 53/54. (This question can be answered at the age you decide to retire and back calculations will be done by the NHS to determine what approach leaves you better off.)
If you work to the age of 60, you will have 6/7 years in the 2015 scheme (assuming membership from April 2022). Most of your pension will have been accumulated in the 1995 pension scheme, and you will have added years on top. My initial feeling is that you will have very little in the way of ‘a pension shortfall’ as a consequence, so, therefore, there may be little reason to sign up for additional pension.
However, to make a good and informed decision, I would suggest meeting with an IFA to go through the various scenarios.
Best wishes, Owen
At age 40 years, with salary of 80,000 pa, if I join NHS pension scheme now, how much monthly deductions and what I will get at retirement, and If I decide to leave UK after ten years, what will happen to the contributions. Regards
Hi there,
Deductions will be at the rate of 13.5% of superannuated gross pay.
The pension would be “deferred” until such time you decided to access the pension (currently you must be over 58 to access the pension). Your pension contributions “buy” pension entitlement that won’t be “lost” whether you are in the UK or not. If you were to access the pension before state retirement age (the 2015 NHS pension normal retirement age (NRA) is linked to state retirement age) then your pension will be reduced proportionately, depending on how “early” you access it.
I’ve attached the scheme members booklet. It gives a good explanation from page 11, onwards. Remember – you will be in the 2015 scheme!
Best wishes, Owen
Hi I am a junior doctor aged 33 and have been working in the NHS since August 2013. I have 1 year and 243 days in the 2008 scheme and the remaining in the 2015 scheme (5 years) according to my TRS statement. Can you help me workout roughly what I can expect to earn from my NHS pension if I plan continue along the traditional path to become a consultant and retire between 65-68? And is this amount including/excluding state pension? Thank you very much
Hi there,
Assuming that you continue along the consultant pathway you could expect a pension of at age 67 to be around the £100k+ mark. This does not include a state pension which is currently approximately £8100 p.a.
Best wishes, Owen
Hi, hoping you can help me. My wife is NHS staff aged 46. She unfortunately is ill informed about her pension, mainly due to working permanent nights for her whole career. I am in the process of understanding the two pensions she is a member of, namely 1995 for 11 years and now the 2015. Am I right that the former is a frozen amount based on her earnings when it was closed, and can you confirm that the latter is a “pot” of 54ths until retirement. Therefore if she retired at 60 she would receive 19 54ths less 7 years of penalties due to retiring early. Also, is the 19 54ths an average of her career salary or an accumulated amount. I do hope this makes sense. Thank you.
Hi Mark
Her pension relating to the 95 scheme will be based on the best of her last three years of employment. Assuming that she has progressed up the career ladder/and/or her Whole Time Equivalent salary is higher now than it was, the ’95 scheme pension benefits will be based on her current whole time equivalent salary, not her salary from 5/6 years ago.
The 2015 scheme works in the way you have outlined – you build up 1/54th of your superannuated salary on a yearly basis. Each year has an inflationary factor(s) applied to it up until the point of retirement. Every year’s allocated pension is then added up to give a cumulative amount. As you allude to – a penalty will be imposed if benefits are taken before the normal retirement age.
Hope this makes things clearer.
Best wishes, Owen
Hi, I am looking for some advice please. I am an NHS Nurse Band 5 £30615. Paying into the NHS pension since 2000. I am 52 in march. Due to recent negative changes at my place of work I am looking elsewhere. Possibility to work from home with a private company still using my nursing skills. What happens to my NHS pension? Thank you so much.
Hi, Debbie
You become a deferred member of the pension scheme. You are entitled to access the pension benefits from age 55 onwards (membership of the ’95 scheme) and age 57/58 with regards to the 2015 scheme. Taking pension benefits early, before the Normal Retirement Age (NRA) associated with the particular scheme (NRA for ’95 scheme is 60 and for the 2015 scheme it’s 67/68) will result in a reduced pension being payable. But this is your choice.
Best wishes, Owen
Hi there? I worked with the NHS for almost 20 years now but did not really continued to contribute/pay on the pension scheme. When I was automatically placed on 1995/2008 & 2015 scheme, I have opted out from it due to lack of understanding and also due to financial instability as well. Now I am 42 years old, and was contemplating with re-joining the NHS 2015 Pension Scheme. Will I still be able to benefit despite the 22 and a bit years contribution? I was aiming to retire at 65 y.o. as I am not intending to work in the NHS more than that years on the same job I am in.
Will a SIPP be a good idea or ISAs?
Hi Jonathan
I would encourage you to rejoin the NHS pension scheme. It is an excellent scheme that provides significant benefits. Before contemplating a SIPP and/or ISA’s you should rejoin the pension scheme. I would also encourage you to get financial advice. You mention a “lack of understanding” – this is precisely why Legal & Medical financial advisers are well placed to offer advice to those in the NHS Pension Scheme. We understand the scheme and help our clients to understand it too! Please feel free to get in touch.
Best wishes, Owen
Hi, I am 52 and have paid into my pension since 1993. I was compulsory moved to the 2015 scheme which I didn’t want as I was hoping to retire at 55 and then work part time. I understand that I will be offered the chance to move my pension back to the 1995 for the years 2015 to 2022 and then I move again to 2015. I do plan to do this – return to the 1995 scheme- but I wonder if then I should just stop paying into a pension as I won’t be contributing to it for long – even if I retire at 60 that would only be 7 years. What do you think?
Hi there
In almost every circumstance I would encourage you to remain a member of the pension scheme and accrue benefits. Before you move back to the 2015 scheme in 2022, I would arrange a meeting with an adviser and look at the different scenarios you are considering (you could do that now). You may find that it still makes financial sense to contribute to the 2015 scheme beyond 2022.
Doing this will inform you as to what your likely pension benefits will be at each stage and from each scheme. From there you can make an informed decision.
Best wishes, Owen
Hello, Thank you for this really useful thread. I am a junior doctor who was on the 2008 pension scheme for around 2 years and then moved over to the 2015 scheme, where I have continued to contribute.
In 2016 I took a ‘year out of training’ where I worked abroad. During this academic year I worked in the NHS for 4 months. I have been told that any breaks taken from paying into the NHS pension can impact the pension scheme, for this reason a friend in a similar position paid her pension contributions even when having a break working abroad.
Is it the case that having a <1 year not working (and therefore not making pension contributions) can have a significant impact on your final pension? Is there a cut off of how long the break is allowed to be? If so can I make back payments?
Thank you very much indeed.
Hi Phoebe
Any break will have some impact. However, the contest is that in a working career of 40 years then 1 year is not necessarily the be-all and end-all. Personally I would not worry. However I would advise you to start to see a financial adviser on a regular basis. Before you know it – weeks turn into years!
Best wishes, Owen
Hi i am looking at retiring at 60 have made contributions of 12 years in the old 95 scheme and currently contributing into the 2015 scheme. I am on a salary of £25000 and am 52 years old . How does the vaue of the 95 pension work .will it be the best of the last 3 years when i reach 60. or the best of the ladt 3 years when it stopped in 2015 thanks.
Hi there
Your pension in the 1995 scheme will be based on the best of the last three years before retirement.
Best wishes, Owen
hi, i joined the 95 pension in 1984, i still on Tapered Protection and ending very soon, and will join the 2015, i will be taking my 95 pension next year aged 60 and still stay in work , no if i have been reading everything right i will not be able to join the 2015 pension, so think i will freeze my pension when i start the 2015, what are your thoughts on this has i will work till 65 and put money in isa or savings….thanks
Hi there
All your service will be eligible for the 95 scheme assuming age 60 next year. It then becomes a choice of whether you want to continue to build pension benefits in the 2015 scheme or not up to your anticipated retirement age of 65. You cannot contribute to the 2015 pension if you have taken your 95 scheme benefits. I would recommend you meet with an adviser to talk through your plans/aspirations, family situation because this will better inform you as to whether its best to stay in the 2015 scheme, not draw your 95 pension, invest in ISA’s etc etc.
Feel free to get in touch.
Best wishes, Owen
Hi,
I have been working as hospital consultant in 1995 pension scheme for 26 years on maximum salary and no further increments expected. I am 62 years old now in 1995 scheme, means I am over retirement age. . Is it useful for me to contribute to continue to boost up my pension pot? I assume my annual pension boost will be not that much compared to 14.5% of my contributions to pension. Or will it be better to retire and return ? For a defined benefit scheme based on final salary, is there any benefit with relation to size of pension pot ?
Thank you very much for your help.
Hi there
With 26 years of service in place, your pension will be substantial. But bearing in mind that you could achieve 45 years of service, then there is no need necessarily, to leave the pension scheme – you will continue to build up benefits. You have to decide whether your ongoing, sizeable contributions are giving you your desired future pension benefit. That is a personal decision, but I would recommend chatting it through with an adviser in the context of other elements of your finances.
Best wishes, Owen
Hi
I am thinking of marrying for the 2nd time but would like (if ever applicable and hopefully not) for any ‘death in service’ lump sum to go to my estate rather than my spouse so it can be shared equally between my children (both of school age) and spouse. Is this possible or would it automatically go to a spouse and trump any will in place? And would there in addition, still be a small pension for spouse?
Thanks
Hi there,
You can nominate a beneficiary(ies) for the death-in-service lump sum – it doesn’t have to be a spouse or partner. With regards to pension then only your spouse/long-term partner will be eligible for a proportion of your pension. Dependants pensions could be paid to children under the age of 23 and/or if financially dependent upon you as a result of a medical condition, that means it will be difficult for them to provide for themselves.
Nominations | NHSBSA will take you to the page where a pdf form is available to enable nominations.
I hope this helps.
Best wishes, Owen
Hello, and thank you Owen for all this information, really decent of you.
I am now a senior nurse educator and have been working in the NHS since 1988.
I now have a good salary. My husband has a SIPP and he was saying it can be inherited by our children, and I suppose run forever if the investments continue to perform and are left untouched.
Can I transfer my pension into a SIPP –I assume i’ll lose benefits, but, our children would inherit a useful (large, I hope) lump of money from both of our SIPPs.
I’ve been ill and the chances of me living to 80 are probably quite low. I’d like to retire early 60s, i’m early 50s currently so have at least 30 years paid in.
Thanks
Hi Jane
It’s not possible to transfer the NHS pension into a SIPP or personal pension arrangement. Sorry.
Best wishes, Owen
Hi,
Thanks for all this insightful information. I am a foreigner working in the NHS as a nurse.I have started at 40 years and plan to work 15 years, retire and move back to my country at 55 years. Is it possible for me to claim lumpsome at 55 years? If yes what percentage?
Hi there
Yes, you can claim your pension and lump sum at age 55. However, it is difficult to calculate the lump sum. I can tell you that if you were to take benefits at age 55, then you are likely to receive a pension that is 45% less than it would have been at age 67. You would then elect to take a percentage of this reduced income as a lump sum within the applicable scheme rules.
Best wishes, Owen
Hello, do you think there is likely to be any change in current NHS pension plans , that would allow staff to transfer the hypothetical pot value. This pension does seem very unfair on single people with older children who would prefer to take the CETV and invest their pot , to support loved ones via inheritance in the event of early death after retirement especially at 55 .
Surely not having the same rights as other schemes is morally incorrect.
Hi Maria
No, I don’t see any possibility whatsoever of any “state-backed/occupational schemes” allowing members to apply for a CETV and transferring away. The potential “up-front” cost when one considers the pension schemes affected – NHS, the MOD, Civil Service, Police etc. etc would be crippling.
Best wishes, Owen
Hi, NHS Nurse here on a salary of £47k but for the last 3 years have earned £60k pensionable pay due to being a night worker. I don’t see this changing anytime soon due to the role I’m in.
I joined the 2008 scheme in June 2009 and was then transferred to the 2015 scheme in 2015. My plan would be to put the contribution from 2015-2022 back into the 2008 scheme to allow a retirement age of 65 (without reduction) and then freeze the 2015 scheme to take at state pension age.
Ultimately wanting early retirement which I plan to fund via ISAs & SIPPs until I can claim the NHS pension(s)
Question;
Will the 2008 pension ‘reckonable pay’ and best of 3 years in the last 10 years be calculated based on my salary at April 2022 or when I stop contributing to the NHS pension scheme as a whole in the future
Thank you
Hi there,
Our understanding of this is, that as long as you are an active member of the 2015 scheme, the 2008 “best 3 consecutive years in the last 10” reckonable pay applies from the last day you are an active member in the 2015 scheme (assuming you have not had a break of more than 5 years). This link may be useful: Your NHS pension after 01 April 2022
You do not have a choice initially under the McCloud judgement, as you will be moved back into the 2008 scheme from 1st October 2023. You will then be given the option at retirement with a comparison with the 2015 scheme for the “remedy “ period.
I hope this helps.
Best wishes, Owen
Hi. I am 52 years old. I recently joined the NHS as a band 2. I have just secured a job as a band 3 (£20330-£21777) It is likely that I will stay on a band 3 until I leave or retire. I took a pay cut of around £3000 (based on a band 3) to join the NHS. I thought the difference in salary was more or less negated by the NHS employer pension contribution but I now think I may have made a mistake. I don’t really want to work passed 60. Obviously, there were other reasons for leaving my job but I am now thinking of getting a similarly paid job back in the private sector and putting the £3000 difference a year into a private pension. Does this seem logical to you?
Hi there,
You can take early retirement from the NHS and claim your pension from age 55 (currently), so if you want to stop working at age 60….you can.
Your pension will be less because you have contributed for less time. This is taken into account along with the statistic that those individuals retiring early, tend to claim their pension for longer. Consequently, the NHS will apply an actuarial reduction to the pension of those individuals retiring before the Normal Retirement Age. Regarding making a personal pension contribution, rather than a contribution to the NHS pension scheme – you really can’t compare! The NHS pension scheme has no investment risk. It is index-linked, it provides pensions for dependants in the event of your death, it provides a Death in Service Lump sum, and it also provides a pension in the event of ill-health retirement and more.
The personal pension could be seen as being more flexible but, I would strongly recommend talking to someone before making choices around pensions. All our Legal and Medical adviser’s are very knowledgable on pensions.
Best wishes, Owen
Good afternoon,
I am 28 years old and will be starting full time employment as a band 5 nurse. I would like to know the benefits of joining the NHS pension scheme and how the scheme works. Any information would be appreciated. Thanks
Hi there
I have attached the membership booklet as a reference. NHS Pension Scheme Booklet (wsh.nhs.uk) If I could summarise the pension scheme. All in all the scheme is an amazing scheme! It is an occupational pension scheme that will provide benefits for you and potentially your partner/spouse and/or children in the form of a pension. However, it also offers Ill-health retirement benefits before your pensionable age, if you were long-term incapacitated and couldn’t work. It also provides death-in-service benefits.
The level of contribution that you are required to make is based on your income but your employer makes a deemed contribution of 24%+ of basic salary to your pension (you don’t see this but it is happening in the background) – this is unbelievably generous! I would recommend that you try to arrange a meeting with one of our advisers to discuss how the pension fits in with your overall financial situation.
Please do get in touch with one of our advisers they have great knowledge of the NHS pension scheme.
Best wishes, Owen
Hi. I’m 40 and joined 95 pension in 2006. If I buy extra pension before April 22 can this be put back into the 95 section with the rest of my pension up to that point (NHS pensions will only allow me to add it under 2015)? I also signed up for 5 years added years (3.16% pay to age 60) -assuming that if the govt were taking it away, it must be worth having- and don’t really know what this actually means for my pension (esp if I try taking my pension at 60)! Thanks
Hi there
Buying additional pension – this is a complex question and involves trying to second-guess the way forward that the NHS pension scheme will move forward with. My feeling is that as it is a 2015 “add-on” it will remain a 2015 add-on. Regards Added years – I am an advocate on the basis that although some view them as expensive and they do impact your annual allowance – they are a contract written to age 60 when the normal retirement age (state and NHS) will be 67-68!
I think that you should arrange a meeting with an adviser. You obviously have a good grasp of the scheme, but maybe it would be an idea to look at how the pension scheme fits in with your overall financial situation and aspirations.
Best wishes, Owen
Hi. I was in the NHS pension from 2005 to 2016. After an 18 month career gap I began working in academia and switched to a USS university pension in December 2017. At the time there was an option to stay in the NHS pension but I didn’t. The USS pension conditions seem to be continually worsening. I have approached my university employer about rejoining the NHS pensions scheme but they tell me it’s now too late. Would you agree the NHS pension is superior to USS and is there any way I could try and appeal to rejoin the NHS? Thanks
Hi there
The accrual rate and level of contribution has changed/is changing in the USS but I’m not in a position to say whether it is worse or better than the NHS. In terms or rejoining the NHS pension scheme, then I suggest you call the NHS on 0300 330 1346 and ask. I cant see any reason why not – and you could consider switching back.
Best wishes, Owen
Hi Owen,
Good effort replying to there post after all these years! I started paying in when i was 33 and i will probable be with the NHS until i retire. This is my only pension, is it worth doing additional contributions to cover the previous years or taking out take about an AVC?
Thank you
Chris
Hi Chris
I think there are a few types of pensions you could consider. Anything associated with the NHS will have some sort of restriction – whether that is an amount or a provider and/or linked to retirement age. You may want to consider a personal pension as an alternative? However, to do that, there are a number of factors to consider – investment risk, current NHS pension inputs, future retirement date etc. etc. So I would recommend that you talk to one of the advisers before making any decisions.
Best wishes, Owen
Hi Owen
I’m 42 and have only been in the NHS for 3 years, but have contributions in both the 2015 and 2008 schemes having completed a ‘club’ transfer from my previous employment in the Civil Service. Could you advise how I should expect to be treated under the McCloud judgement – will I benefit from having some of my years effectively transferred to the older final salary scheme as I would have done if I had stayed in the civil service scheme?
Another question – I have about 20k sitting in a SIPP and wondering if there is any way to transfer this into the NHS scheme for example as
Hi there,
My feeling here is that your benefits would have been transferred into the 2015 scheme as this was “open”, the 2008 scheme wasn’t, assuming you were not in a transition phase. I would contact NHS pensions and ask them for their opinion.
As for money sitting in a SIPP – you can’t pay that in, but it could fund some additional pension, but technically this isn’t adding to the main scheme. I would speak to an adviser – there is something to be said for the flexibility that is offered by a SIPP!
Best wishes, Owen
Hi Owen
I left the nhs to work in academia fulltime in January 2017. I left for a new challenge but at the time also felt the changes to nhs pensions was making that less of a hold on me. I have been out now for 5.5 years and was on the 1995 pension with 21years (19 in 1995 and 2 in 2008 section) that I froze On leaving my final best year salary was just under 50k as an 8a. I am however now looking to return and plan to come back in on advanced banding of 8b or 8c.
1. How much damage has exceeding the 5 year break done to my pension if I return and is it worth rejoining and starting the 2015 pension.
2.Could I appeal the 5 year ruling to ensure my final salary pension accrual is secured in my frozen 1995. As I suspect if I return my banding will be higher than the 8a I left on. The changes and confusion around nhs pensions seems to be misleading people to make bad choices. Also if reduces incentive to return with the pension rulings…
3. Is it worth if I come back transferring my uss and teaching pension pot over to the 2005 section?
Hi there
Can I recommend that you meet up with one of our advisers? This is quite complex.
Yes, you should rejoin the NHS pension scheme but you need to talk this through with an adviser. The obvious observation is that if you were over the lifetime allowance, so you may think twice about joining a scheme. This is probably not the case but all the same, it strengthens the assertion that you should have an individual meeting where your circumstances can be considered as part of the overall advice.
The 95 scheme is a final salary scheme but because you have been out of the scheme for 5+ years then the new salary that you receive, even though higher, will not be reflected. Rather, your 95 scheme benefits are based on the best of the last three years before you left. I’m not sure that an appeal would be successful.
In terms of transfer – before doing that, I would look at the Normal retirement age associated with each scheme. They may have earlier retirement dates than the 2015 which is linked to State retirement.
Best wishes, Owen
Hi Owen,
I am 51 years old and have contributed to my NHS pension since 2004.
I am looking to invest £5k and don’t necessarily need access to it before retirement age. I am undecided as to whether it would be more beneficial for me to top up my pension or invest in a Stocks and Shares Isa (low/medium risk).
Can you give me any advice?
Thanks
Kelly
Hi there
Depending on your tax status you will get 45%, 40% or 20% tax relief on a pension contribution. What you don’t make clear is whether you intend to contribute an additional amount to your NHS pension or a personal pension. There are other things to consider, but this largely depends on the answer to the above question.
An ISA contribution doesn’t benefit from tax relief but you do have access to the money within the ISA at all times. This is not necessarily the case with pensions.
I hope this starts to answer some of your questions. Feel free to contact one of our advisers if you need further help.
Best wishes, Owen
Hi I am planning to retire in the next 3 to 4 months. I Joined the 1995 scheme and have 31 years reckonable service.I have been in the 2015 since April of this year. I am a band 7 nurse. I have special class status and could of retired at 55 but I will be 58 when I do retire. I plan to take the 1995 pension as I assume this is the best choice. I will only have 9 months in the 2015 pension but don’t know whether to leave that part of my pension until 67 or what will it be worth with the reduction for taking the 2015 part early. A colleague has suggested the 2015 is a better option for me but surely I will take a large reduction for retiring early on the 2015 pension. What are your thoughts.
Hi there
In some ways, there is no right or wrong answer, but you definitely need to seek advice and look at things objectively. Taking your 2015 pension or not should be thought out and is completely dependent on personal circumstances – financial, general, health etc. etc. It may be worth speaking to an adviser as this would help give you “context”.
Best wishes, Owen
Hi Owen. I would like to commend you for this high ranking article which will never (I think) become outdated. Whilst I believe that the NHS pension is still a good option compared for example to a SIPP but there are angles that made me opt out after about 10 years+ of contributions. I am interested on your insight on my reasons and their accuracy. I currently around £80K and own a SIPP pension:
1. The new retirement age was a killer switch for me; the disadvantage of contributing till 67 (going over to 68). The equiv. For SIPP is 55 ( going up to 57). If you take NHS pension early for example 10 years would reduce your NHS pension by 40%. Also the issues of working til late 60s.
2. I would leave the scheme early within the next few years and be hit by the “career average” imposition of post 2015 rules (1995 still there and protected)
3. Death benefits of a SIPP – essentially could be inherited by all family including grown up kids (subject to some tax arrangements, 25% free). For reference my dad passed away aged 70, a colleague just passed away in late 50s and surgeons on average don’t live that long! (Death is a topic we all avoid!)
Still agree that NHS pension is good value (“less” good in 2015/2022) but I am curious about your insight on my circumstance. In a nutshell I believe one bird in the hand is better than 3 in the bush!
Hi there,
All valid observations BUT…
SIPP – I like the flexibility, and some of my clients have in the past, contributed to the NHS and personal pensions. But the NHS gives you an index-linked pension for life, with no investment risk. You can access “early” and “yes” you would have a penalty applied, but even with the penalty for taking it early, it will still be a fantastic pension.
Career average or 95 scheme – they are both still excellent schemes and, in my opinion, worth being a member of both.
Yes, the SIPP can benefit anyone in the event of death. In this way, it is “better” than the NHS pension. However, the size of benefits that could be payable to your closest family spouse, life partner and dependents are significant, and I imagine that they would be significantly more at this stage of your career than the £80,000 offered by the SIPP.
Best wishes, Owen