It is important that doctors considering relocating overseas understand the implications for their pensions
Higher salaries and more attractive working conditions are tempting many doctors to consider moving abroad. One recent British Medical Association survey found that four in 10 junior doctors in the UK intend to leave the National Health Service as soon as they find a new post overseas. A third were hoping to make the move within the next 12 months.
There are plenty of options to consider. Australia and New Zealand are particularly popular potential destinations, with 42% and 20% of doctors looking at posts in those countries respectively. But doctors are also interested in working in the Middle East, Canada and continental Europe. The United States is also an option for some.
What about my pension?
Deciding to move to a new job in another country is a big decision. There will be lots of factors to consider, including personal, professional and financial issues. But one question that doctors should certainly not overlook is their membership of the NHS Pension Scheme. The choices they make today will have significant implications for their retirement years.
Once you leave the NHS, you will no longer be an active member of the NHS Pension Scheme. But you will still need to think about the benefits you have built up so far. Your options will partly depend on how long you’ve been a member of the scheme, but also what you do in the future.
One option might be to cut your ties with the NHS Pension Scheme, by asking for a refund of the contributions you have made so far. However, this will only be possible if you have been a member of the scheme for less than two years. It’s worth mentioning that if a refund of contributions is not requested and you return to the NHS after a break of more than 5 years, the earlier service will be refunded on joining the pension scheme again. Alternatively, you may be able to transfer your NHS Pension Scheme benefits to a pension scheme you join while working overseas; for that to be an option, the new scheme must be registered with HM Revenue & Customers as a qualifying overseas pension scheme (a QROPS in the jargon).
If you don’t take either of these options, you will become a deferred member of the NHS Pension Scheme. This means your entitlement will be maintained until you’re ready and able to claim your pension benefits later in life.
What happens next will be affected by the rest of your working life. If you remain abroad until you claim your benefits, your NHS pension can be paid to you wherever you are living. You can opt to have the money paid into a bank account in the UK, or into your account locally; if the latter, you can have the benefits paid in local currency. While you are abroad, you will also be entitled to receive any increases to pensions in payment awarded in the UK.
Alternatively, many doctors return to the UK after a period abroad, taking up new posts within the NHS, and rejoining the NHS Pension Scheme. Here, there are several different scenarios.
First, if you rejoin the 2015 NHS Pension Scheme after a break of five years or less, your new membership will link up with your previous membership. Your previous pension rights will receive full in-scheme revaluation at a rate set by the Treasury, plus 1.5%, for each scheme year during the break. If you have benefits in the 1995 or 2008 sections of the NHS Pension Scheme, these will be retained and calculated according to your final salary at (or close to) your retirement. This is known as a “final salary link”. When the 2015 scheme was launched, the value of benefits built up in the 1995 and 2008 sections remained protected.
Another possibility is that you come back to the NHS after more than five years. In which case, if you were previously in the 2015 scheme, this membership will not be linked to your new membership; in-scheme revaluation will stop – instead, your benefits at retirement will be revalued through the application of pension increases. Your entitlement for your two different periods of memberships will be calculated separately; only your membership on your return will be eligible for in-scheme revaluation.
Similarly, if you have benefits in the 1995 or 2008 sections, these will be treated separately to your new membership of the 2015 NHS Pension Scheme if you’re returning to the NHS after a break of more than five years. However preserved benefits built up in the 1995 section after a break of 12 months means that earlier benefits can be calculated separately from the later one and the final salary link is only lost if the break is 5 years or more. After a break of 5 years if you were previously a member of the 1995 section and you’re under the age of 60, you will be given a one-off opportunity to transfer your entitlement to the 2015 scheme. The same applies if you were a member of the 2008 section and you’re under 65.
A final point if you’re considering working abroad in the form of voluntary work such as working for the Red Cross or VSO you can remain a member of the NHS Pension Scheme. You must apply within 3 months of starting a new job and have contributed to the scheme at some time during the last 12 months.
These arrangements are quite complex – and difficult to plan for if you’re not sure about how long you’ll stay working overseas. Taking independent financial advice on your options before you leave the UK makes sense.
Content correct at time of writing and is intended for general information only and should not be construed as advice.