The benefits of an NHS pension are widely considered to be very good, but you may want to increase your pension for when you need it, which you can do if you pay extra into your NHS pension. Here’s how it works.
Whether part of a busy GP practice tending to the needs of a local community or working in a hectic Accident & Emergency Department, they’re all vital in caring for the health of the nation.
In return, for looking after us, medical professionals themselves are looked after with the NHS Pension Scheme, an attractive benefit for those who work in such a challenging environment. As a medic, there may be some aspects of your NHS pension that you’re not too sure about, such as how much you pay in; if that’s enough; or if you should be considering paying extra into your NHS pension.
Before I pay extra into my NHS pension, what is the contribution rate?
Both full-time and part-time medical professionals make a contribution to their NHS Pension each month, paying a percentage of their pensionable earnings into the pension. For a hospital doctor in England, Wales and Northern Ireland the NHS Pension contribution rate depends on the level of pensionable earnings (see below) and starts at 5.1% for anyone earning less than £13,247 a year, rising in stages to 13.5% for those on £72,031 a year or more. The rates are set to be adjusted further as outlined in the table below where the top rate will reduce to 12.5%.
| Pensionable salary range from 1 October 2022 (the new salary ranges have been consulted on and will be published shortly on www.gov.uk): | Contribution rates from 1 October 2022 (based on actual annual pensionable pay): | Future planned contribution rates (based on actual annual pensionable pay): |
| Up to £13,246 | 5.1% | 5.2% |
| £13,247 to £16,831 | 5.7% | 6.5% |
| £16,832 to £22,878 | 6.1% | 6.5% |
| £22,879 to £23,948 | 6.8% | 6.5% |
| £23,949 to £28,223 | 7.7% | 8.3% |
| £28,224 to £29,179 | 8.8% | 8.3% |
| £29,180 to £43,805 | 9.8% | 9.8% |
| £43,806 to £49,245 | 10% | 10.7% |
| £49,246 to £56,163 | 11.6% | 10.7% |
| £56,164 to £72,030 | 12.5% | 12.5% |
| £72,031 and above | 13.5% | 12.5% |
NHS Pension contribution rates in Scotland
Pensionable earning band in 2021/2022 |
Contribution percentage rate from 1 April 2022 |
| Up to £21,614 | 5.2% |
| £21,615 to £25,981 | 5.8% |
| £25,982 to £32,914 | 7.3% |
| £32,915 to £66,017 | 9.5% |
| £66,018 to £92,423 | 12.7% |
| £92,424 to £123,147 | 13.7% |
| £123,148 and above | 14.7% |
For a GP in England, Wales and Northern Ireland in the 2015 NHS Pension Scheme, the contribution rates are the same but are determined by the level of annualised earnings. In Scotland, annualisation of earnings is not applied and the contribution is based on actual earnings. The member contribution is then topped up by an employer contribution. In England and Wales the rate for this changed from 14.38% to 20.68% on 1 April 2019, which includes a scheme administration charge of 0.08%. In Scotland the rate is 20.9% and in Northern Ireland 22.5%.
You receive pension tax relief on your contributions at your highest marginal rate of income tax.
Can I pay extra into my NHS pension?
Yes, you can pay more than the fixed contribution into your NHS Pension Scheme. However, whether you should or shouldn’t pay extra into the NHS pension is a completely different matter.
Why should I consider paying extra into my NHS pension?
There are various reasons why you might want to adjust your contribution rate and pay extra into your NHS pension. These include:
- Short service.
You may have joined the NHS and qualified as a medical professional later in life, meaning you have fewer years of membership of the pension scheme. Another reason for joining the scheme late applies to those medics who have relocated from overseas to work for the health service.
- Shortfall in retirement income / retiring early
You may just want more income in retirement or want to have the option to retire early.
- Part-time.
It may be that you have not always worked full-time as a medical professional within the NHS, so therefore have contributed less to your pension.
- Career breaks.
It is not uncommon for medical professionals working in this demanding profession to have career breaks, which equates to a reduction in pension contributions.
How do I contribute more to my NHS Pension?
There are three ways in which it is possible to pay more money into your NHS Pension Scheme, should you wish to.
- Added years.
This option is no longer available for new applicants but there will currently be many medical professionals who are paying extra contributions to have years added to their pensions.
- Additional pension purchase.
Within the pension scheme, medical professionals can buy additional annual pension benefits in set £250 amounts. The cost, which is determined by the scheme actuary, depends on your age and whether you include dependent benefits and can be paid with a lump-sum or over a fixed-term of between one and 20 years. The maximum available to purchase is £6,500 within the 2015 Scheme.
Early Retirement Reduction Buy-Out (ERRBO) This option is only available within the 2015 Scheme, where the normal pension age is in line with State Pension Age.
Members can pay extra contributions to buy out the reduction that would apply if they claimed their benefits up to three years early, with a minimum age of 65.
Are there any other additional ways of topping up my NHS pension?
Money Purchase Additional Voluntary Contributions are another option for topping up your NHS Pension. These are Additional Voluntary Contribution (AVC) schemes provided for the NHS by Standard Life and Prudential. These do not guarantee a set income in retirement but instead offer flexibility. For example, a doctor could retire early or reduce the number of hours he or she works by using an AVC to fund this until his or her NHS Pension starts to pay out.
We can provide AVC pension advice.
Personal Pensions
Like Money Purchase AVC’s personal pensions are flexible and equally rely on investment performance. They can be accessed from age 55(age 57 from 2028) and can be a useful complement to your NHS pension.
With any additional pension planning it is essential to consider the potential impact on the annual allowance.
Whatever your motivation to increase your pension funding, given the array of options available, whether through your employer or a private arrangement, it is imperative that your pension saving strategy is well informed.
As an independent pension adviser and specialist in the NHS Pension Scheme, Chase de Vere Medical has been helping doctors to plan effective pension strategies to reach their objectives for 17 years. To ensure you take the right steps toward your retirement, speak to an adviser today.
The contents of this article are for information purposes only and do not constitute individual advice.