As a healthcare professional you have dedicated your life to your profession and helping other people and you deserve to have a comfortable retirement, so you may be starting to turn your attention to how to get the most out of your pension.
If you have opted into the NHS Pension, there are standard benefits you will be the recipient of. Some of those benefits will depend on whether you’re in the 1995, 2008 or 2015 scheme, but for most members the three main entitlements are your annual pension, a lump sum at retirement and a survivor pension.
There are some ways you can increase your NHS Pension benefits in order to get the most out of the scheme. Let’s take a look at some of the things you could do.
Making the most of your NHS Pension: Additional Voluntary Contributions
One way to increase your pension benefits is by making Additional Voluntary Contributions (AVCs). They can be either a regular payment or a lump sum that you pay into a separate account to be invested for extra income during your retirement.
Of course, the funds are invested which means the value may fluctuate and it’s not guaranteed, what you receive will depend on the performance of the fund you invest in. This is why it is important to seek financial advice from a medical finance specialist who will be able to offer their experience to guide you and help you understand your investments so you can make the most out of your NHS Pension.
AVCs can be an efficient way to boost your retirement savings because you get tax relief on the payments, which adds up over the years. The payments can be stopped, restarted and adjusted at any time or lump sums paid, depending on your financial circumstances at the time.
When you reach your pension age, you can take up to 25% of the fund value as a tax-free lump sum in addition to any lump sum you take from the NHS Scheme (within allowable limits).
Making the most of your NHS Pension: Additional Pension
Another way to strengthen your benefits is to buy an amount of Additional Pension, which will be added to your standard annual NHS Pension when you retire. This can be paid for in one lump sum, or through regular payments taken from your pay over a maximum period of 20 years – which makes it a good option for those earlier on in their careers. The cost of buying Additional Pension is the same, whether you work full or part-time.
Members of the 2015 scheme can buy Additional Pension up to a maximum of £8,036.00. This can be purchased either as personal cover which increases your benefits only, or as dependants’ cover which increases both your pension and the benefits that will be payable to your spouse, partner or children in the event of your death.
Additional Pension does not include an automatic lump sum but you can include your Additional Pension in the total pension exchanged for a lump sum.
Other ways to make the most of your NHS Pension
Depending on which NHS Pension scheme you’re in, there are some other circumstances where you can increase, enhance and protect your NHS Pension benefits.
Members of the 2015 scheme have the option of Early Retirement Reduction Buy Out (ERRBO). Ordinarily when you retire early your pension would be reduced to account for the longer pay-out period. However, with ERRBO you have the option to buy out the reduction that would apply if you claimed your NHS Pension before your normal pension age.
Some members of the 1995 scheme may be able to buy membership back as added years at half cost. This effectively is buying extra years of membership to boost their benefits, but this only applies to those who took a refund of NHS contributions for a period of membership prior to 6 April 1978, or for any period when they were a self employed GP.
The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.
Content correct at time of writing and is intended for general information only and should not be construed as advice.