NHS pensions

Will your NHS pension provide you with a good standard of living when you retire?

The new NHS pension scheme, implemented in April 2015, is less generous compared to previous schemes. Unlike the old schemes, which were based on the member’s final salary, the new scheme calculates the pension based on the member’s salary throughout their career.

The 2015 NHS pension scheme is a defined benefit pension, where members receive a pension based on their pensionable pay each year.

To qualify for a pension, members contribute a percentage of their pensionable pay, starting at 5% and gradually increasing to a maximum of 14.5%. Additional contribution options are available, but certain conditions must be met.

Thinking about early retirement?

NHS staff have the option to choose an early retirement reduction buy-out (ERRBO). This involves paying additional contributions to compensate for the reduction in pension benefits if they retire up to three years before their retirement date.

The minimum pension age in the scheme is currently 55. However, if members choose to retire early at 55, their pension amount is reduced to account for the earlier start date. ERRBO benefits can only be purchased by those retiring at 65 or later.

High earners: know your allowances

High earners need to be aware of the reduced annual personal allowance, now set at £60,000, and the lifetime allowance of £1,073,100. Starting from April 2016, a tapered annual allowance was introduced, affecting individuals with income exceeding £200,000. This means that some high earners may have an annual allowance as low as £10,000.

If you are nearing these allowance limits, it is important to consult with us. Exceeding the limits can result in additional tax charges.

What other issues should I take into consideration?

  • What is your current pension position and what future retirement benefits can you expect?
  • How can you leverage the pension legislation to take advantage of e.g. pension freedoms in your financial plans?
  • What tax impacts should I be aware of in life and on death?
  • How does the new reduced annual and lifetime allowance affect you?
  • What other types of tax-efficient investments should you consider as part of your overall financial plan for retirement?
  • Can I make additional voluntary contributions to my NHS pension?
  • Is retiring at age 60 realistic for NHS staff, doctors, dentists and consultants?
  • Does the NHS pension scheme represent good value for money or are there better options to consider?

Individual financial advice

If you would like to discuss your retirement objectives, our NHS pension scheme specialist IFA, Scott Lawson would be delighted to assist.

We offer free consultations to help you navigate the choices available and ensure your best interests are prioritised, without any sales pressure.

Take the first step towards your financial goals. Call us 0141 272 0000 or simply fill out our online enquiry form to get started.