Early retirement, the maximum lifetime allowance and pension simplification explained....

NHS PENSION SCHEME (EARLY RETIREMENT)

 

Voluntary early NHS retirement from age 50 is possible from the 1995 section and age 55 from the 2008 section, However, NHS pension benefits will be actuarially reduced if taken prior to normal retirement (60 or 65). No reduction applies for ill health retirement.

 

Please note: If an existing member leaves the NHS for 5 years or more, and then comes back (a disqualifying break) they are unable to rejoin the existing 1995 Section of the NHSPS but do have the option to join the 2008 Section NHS Pension Scheme.

 

 

 

PENSION SIMPLIFICATION

 

Pension Simplification was introduced in April 2006 and introduced the Standard Lifetime Allowance (SLA). This was initially set at £1,500,000 and will be frozen at £1.8million for the tax years 2010/11 to 2015/16. When an individual takes their pension benefits, the benefits are assessed against the prevailing SLA. Any excess will be subject to the Lifetime Allowance Charge, which in effect is a tax at 55% on the excess amount.

 

The 1995 Section Practitioners pension benefits shown above would utilise £1,043,280 or 57.96% of the £1.8million SLA. The 2008 Section Practitioner example above would absorb 88.88%.

 

 

MAXIMUM SERVICE ALLOWED

 

Pensionable “service” may not exceed….

• 40 years by age 60
• 45 years by age 65
• Different for special classes
• Service after age 70 does not count and benefits will be paid from the 1995 Section
• Retirement benefits arising in the 2008 Section will be actuarially increased if retirement is delayed beyond 65

 

FUNDING FOR MAXIMUM PENSION BENEFITS (practitioners / salaried NHS appointment)

 

To obtain maximum benefits from the NHS pension scheme 40 years service at age 60 is normally needed.   Doctors normally qualify in their early 20s and therefore will have a pension shortfall at age 60. This can be made up by making additional contributions

 

NHS EARNINGS             -       NHS ADDITIONAL PENSION SCHEME

                                         -       STAKEHOLDER/PERSONAL PENSIONS

 

But be aware of the Standard Lifetime Allowance (from 6th April 2010 £1.8million) and aim not to exceed it!

 

Action Point: Write to the NHSPS to obtain a statement of service and details of benefits accrued to date, as well as a projection of benefits at a normal retirement date.

 

Provided courtesy of Kelvin Turner from Medical Money Management wwww.mmmnet.co.uk

Medical Money Management is authorised and regulated by the Financial Services Authority