What you need to know about your NHS pension
NHS workers are entitled to be members of the NHS pension scheme. There are three different sections of the NHS pension schemes, but all provide what is known as a ‘defined benefit’ pension. This means that the pension will pay you a guaranteed income for life, starting from your official retirement date.
Is the NHS pension scheme good?
The NHS pension is more generous than most private sector pensions. Furthermore, defined benefit schemes in general provide more security than other pensions, as the money can never run out.
The NHS pension has been revised, so more recent members may receive less generous benefits than before. How your benefits are calculated (and when you start receiving them) will depend on whether you accrued those benefits in the 1995 section, the 2008 section, or the 2015 section. Nevertheless, when compared against workplace pensions in general, it remains outstanding value.
The 1995 and 2008 sections are both ‘final salary’ pensions. The 2015 section is an ‘average salary’ pension, where your income is based on a portion of your average salary over your NHS career. In some cases this may result in the 2015 section being less generous, but not necessarily.
What are the benefits of getting advice on my NHS pension?
Due to how the NHS Pension is calculated, it can be hard to predict exactly how much income you stand to receive from it, and from what age. In particular, if you were a member of a previous section of the scheme, you may be able to take your pension earlier. Similarly, you may be eligible for ‘protection’ of your benefits under that section of the scheme, which could mean a higher pension.
There are so many factors involved that it can be hard to know exactly how much you’ll get. You may also face questions such as:
• Will my pension be enough for me in retirement?
• At what age will I start to receive my pension?
• Could I take my pension earlier and how much would it be?
• Can I increase my NHS pension by making extra contributions – and should I?
• Am I paying too much into my NHS pension, taking me over my pension allowances?
The last point is particularly relevant for higher-earning NHS workers, who may find themselves exceeding their annual or lifetime allowance and facing an extra tax charge.
Understand your pension
Advice can help you get to grips with how your pension works and how much you can expect to get.
Your financial adviser can help you reduce the risk of tax charges if you’re close to your pension allowances.
Improve your retirement
Work out how much you might need in retirement, and take action now to ensure you get it.
Where can I find advice on my NHS pension?
Look for an independent financial adviser who specialises in NHS and public sector pension schemes. You can find an IFA with this specialist area of expertise by customising your Unbiased search.Find your specialist adviser
Frequently Asked Questions
Can I retire early on the NHS pension?
Your ‘normal retirement age’ is set by the NHS pension scheme, and depends on which section(s) you have built up benefits in. Normal retirement age is the age at which you could retire and receive the full benefits of the scheme. You can choose to retire earlier than this, but you will receive lower benefits as a result. The normal retirement ages are as follows: · 1995 section: 60
· 2008 section: 65
· 2015 section: your state pension age
However, under the 2015 section only you can retire earlier than your normal retirement age without any penalty, provided you ‘buy back’ the extra time by making additional contributions. This is explained below. The earliest you can take any NHS pension is 55. However, your benefits will be significantly reduced if you take it this early.
How do I buy back NHS Pension years?
You can increase the payout that your NHS Pension will provide in retirement, by buying Additional Pension. You can buy this using either
· a one-off lump sum
· regular contributions from your pay over a period of time
Additional pension can increase the income paid to you in retirement, or the benefits paid out to your dependents after your death, or both (you choose which you want it to be).
Can I take a lump sum from my NHS Pension (and do I have to?)
Everyone is entitled to take up to 25 per cent of their pension as a tax-free lump sum, and NHS pension scheme members are no exception. If you belonged to the 1995 section or 2008 section, then you must take a tax-free lump sum of at least three times your annual pension. There is no requirement to take a lump sum for members of the 2015 section.
Should I take a lump sum?
If you have the choice, your decision about whether or not to take a tax-free lump sum should depend on your circumstances and your plans. Similarly, if you have to take a minimum lump sum, you may wonder if you should take the maximum allowed. Consider factors such as whether a higher guaranteed income for life is preferable to having a larger amount to spend now. A financial adviser can help you with this decision too.
Can I transfer out of my NHS pension?
You can’t transfer out of an NHS pension, unlike some defined benefit pensions. The NHS pension is funded directly by the taxpayer, rather than from a central pot of investments, so there is no fund to transfer out of. However, this shouldn’t be seen as a disadvantage.
The guaranteed income provided by the NHS pension, along with its relatively high level of benefits, makes it considerably more generous than most private pensions you can obtain on the open market.
Can I get a refund of my NHS pension contributions?
If you’ve been a member of the NHS pension scheme for only a short time, and are no longer a member, you may be entitled to a refund of your contributions made during that period. This may be an option you’d prefer, as opposed to receiving an extremely small NHS pension income in retirement.
To apply for a refund, you must have been a scheme member for under two years, and have no continuing membership of the NHS pension scheme. Also, you must not have transferred any other pensions into the scheme. An alternative to getting a refund of your pension contributions is to request a transfer of your pension rights to another pension scheme.