Will the NHS protect you and your family if the unexpected happens or do you need to make additional plans to ensure a secure financial future?
Doctors who are focused on the health and wellbeing of their patients also need to remember to look closer to home. While the NHS offers doctors some valuable benefits that will protect their family from unforeseen events, they may need extra cover; this could be crucial if they were to fall ill and unable to work for an extended period of time – or in the event of their death.
Doctors, therefore, need to keep their protection arrangements under review. Over time, NHS benefits change, according to Salary, including pensionable salary and length of service. During this time, family circumstances are bound to also change. Regular check-ups, once per year, make sense, however, there are also certain triggers that should prompt doctors to perform a review with a qualified financial adviser. If you are a doctor who has started a new job or recently received a pay rise, reconsider your protection arrangements. At home, getting married, having children or buying a new property are all reasons why you should conduct a financial review.
Sick pay explained
As a starting point, doctors must first get to grips with what the NHS offers. If you are employed and fall ill, you will be able to claim full pay for a period of time, the length of which varies according to your length of service. In year one, you’re entitled to one month’s worth of sick pay at full-pay levels. This doubles in your second year of service and then increases to four months in year three, to five months in years four and five, and finally to six months thereafter.
If you need to take a longer period of time off work to recover, then you’ll still receive some support – you can claim half pay for a further two months if you’re in your first year of service. In subsequent years, your half-pay entitlement is the same as your full-pay period and follows on automatically. So, in year two of your NHS service, for example, you’re entitled to two months off work sick on full pay and then an additional two months on half pay. Ultimately, after five years of service, you will attain the maximum sick pay benefits of six months full pay followed by six months half pay.
As a doctor, you are entitled to apply for ill-health retirement and, if your application is successful, will get either “Tier 1” or “Tier 2” benefits, depending on the circumstances of your ill health.
Tier 1 benefits are for doctors who can prove they are unable to perform in their job because of their ill health. They can claim NHS pension benefits based on the value of the benefits they’ve built up so far with no reduction, but with no opportunity to claim an enhancement either.
Tier 2 benefits are for doctors who meet the Tier 1 rules but whose ill health is serious enough to mean they can’t do another job of similar duration to their NHS role. In these circumstances, the benefits payable depend on which section of the NHS Pension Scheme you belong to.
1995 section members are entitled to Tier 1 benefits, plus an enhancement of two-thirds of the benefits they could have expected at normal pension age (though they can’t get a total benefit worth more than they would ordinarily be due at age 60). For members of the 2008 section, the enhancement is two-thirds of the benefits that they could have expected at age 65 (total benefit is capped at what they would ordinarily have been due at age 65). Finally, if you’re in the 2015 section, you’re entitled to Tier 1 benefits, plus an enhancement based on one half of your potential benefits at normal pension age.
Bear in mind that if you’re unable to prove permanent ill health based on the NHS’ Tier 1 or Tier 2 definitions, you won’t be able to claim early retirement benefits, which will leave you dependent on state benefits and any savings you may have built up.
This is one reason why income protection insurance should be strongly considered, as very few people have adequate savings to replace their income in the long-term. It is essential that any cover is arranged on an ‘own occupation’ basis. This simply means that, in the event of an illness or accident that renders you unfit to carry out your own job, that you are not in a position where you have to find other non-related work that may not require the same level of skill or training.
Death in service benefits
If you die while you’re still employed as an NHS doctor, your family is entitled to death-in-service benefits worth twice your pensionable pay if you’re a member of the 1995 section of the NHS pension scheme, or twice your reckonable pay in the 2008 section or 2015 scheme. Your spouse or qualifying partner is also entitled to a pension for six months following your death based on your pensionable pay at that time.
NHS Pension Scheme members of more than two years’ standing have additional benefits here. Again, the benefits paid are dependent on the scheme you are a member of. In the 1995 section, your spouse, civil partner or nominated qualifying partner will receive an adult’s dependant’s pension for life worth half the amount of the Tier 2 ill-health pension benefits you were entitled to at the time of your death. In the 2008 Section, this is equivalent to 37.5%. If you are a transitional member and also have service in the 2015 scheme you will receive 33.75% of any tier two enhancement. Generally, only memberships since 6th April 1988 count for the purposes of working out this benefit, though this restriction does not apply to widows of male doctors.
Your children are also entitled to receive benefits – these are also based on your Tier 2 ill-health pension entitlement, or, if greater, your pension entitlement based on 10 years of membership.
Do you need more?
These benefits offer strong foundations on which to build, but many doctors will need additional protection to be confident that their families are well provided for; for example, that a mortgage or other debts can be paid off and that their standard of living will not suffer. Insuring your income against ill health provides important reassurance while good quality critical illness and life insurance will also offer comfort.
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Every family’s circumstances are different, so it is vital to take independent financial advice on the type and level of protection you need.
Content correct at time of writing and is intended for general information only and should not be construed as advice.