As doctors, you have dedicated your career to helping others, and you deserve to have a secure retirement when you choose to finish your career. As members of the NHS Pension Scheme, you have good benefits, but there are ways to increase your pension with additional voluntary contributions. Here’s how it works.
Money Purchase Additional Voluntary Contributions
You can make more contributions and build a separate retirement fund with Money Purchase Additional Voluntary Contributions (MPAVC). This scheme allows you to make tax-efficient additional savings on top of your existing NHS Pension Scheme. The additional voluntary contributions that you make are invested and are used to supplement your main scheme benefits during your retirement.
You can take up to 25% of the fund value as a tax-free lump sum in addition to any main scheme lump sum you may want to take. You can also make separate additional voluntary contributions to the company you choose, which will help increase the benefits your dependants receive should you pass before you claim your NHS Pension, providing additional cover.
If you partake in an additional voluntary contributions scheme, you will be expected to pay regular and/or lump sum payments into your plan. You’ll want to allow your pension pot to potentially grow until you take your benefits to make the most of the scheme. You will need to regularly review your investments to make sure you’re on track for retirement, too.
NHS Purchase Additional Voluntary Contributions scheme providers
There are two providers who run the NHS MPAVC scheme:
- Standard Life
Contributions come from your pay, and you can choose the additional voluntary contribution amount. The NHS Business Services Authority has negotiated special NHS terms with these providers, and they are reviewed regularly, but it is important to bear in mind that you would be investing with an external provider, and the funds this produces cannot be guaranteed. However, once in payment, the NHSBSA will guarantee payment of any pension you receive through these arrangements.
The Risks of Additional Voluntary Contributions Schemes
The Additional Voluntary Contributions Schemes are additional investments, and with all investments comes an element of risk that you should consider before opting for it. Those include:
- The value of your investment can go down as well as up, so you may not get back the amount you put in. Past performance is not a reliable indicator of future performance.
- There are different risks for different funds, so look into working with a financial adviser to help you understand them and assess the level of risk you are comfortable with before investing.
- Inflation may mean the money you invest won’t go as far in the future as it does now.
- There may be a delay in buying, selling or switching to or from certain funds.
Always make sure you are well-informed before taking part in an investment scheme.
Are Additional Voluntary Contributions right for me?
Making additional voluntary contributions could be a great option for you when it comes to growing your retirement fund, but there are other options.
To find out whether it’s the right scheme for you or to discuss the other investment options available to you, please get in touch with one of our independent financial advisers today to discuss your options.
The Financial Conduct Authority does not regulate tax planning.
Content correct at time of writing and is intended for general information only and should not be construed as advice.