NHS Pension Scheme Explained
Hi, so in my last article I explained about pension rules. Today I want to explain the 3 different NHS pensions, how to find out what you have and what you need to be aware of going forward.
I’ll do something fun in my next vlog promise, this hurts my head!
Ok so there are 3 NHS pensions;
The 1995 and 2008 NHS pension are both known as final salary pensions. The pension you receive will be based on how long you were an active member of the NHS (and paying into the pension) and your final salary.
The 2015 NHS pension is known as a career average earnings pension, and is based on your salary for each year you were an active member of the NHS (and contributing to the pension).
A summary of the 3 different pensions can be found below;
2015 CARE Pension
Which scheme you are in depends on a number of factors for example; your age in 2012, whether you have left NHS employments and rejoined, etc etc.
You may be a deferred (paid up) member of one of the NHS scheme and an active (contributing) member of the 2015 scheme. If you are not sure what scheme you are in and or have benefits from, I would suggest you check out your pension benefits accrued to date. This can be done on the following link;
I would also suggest having a read of this…
This article gives further detail about options on taking benefits during active service and retirement and or returning to work. (It gets confusing, so I would suggest having a read). Now you remember in the last Vlog I spoke about the lifetime allowance (known in the finance world as the LTA). Well how do you calculate what benefits you have built to date for LTA purposes?
Actually, it is very simple (finally something simple)!!! Look at what benefits you have accrued to date and multiply that by 20 and add the lump sum (if eligible). That is your pension benefits for LTA purposes. If you are approaching and or over the lifetime allowance then it may be worth having a chat to someone about your options. If you are massively over the LTA you may be able to protect some of your pension benefits and I wound suggest you get advice.
Let us also recap about the other rule I mentioned; the Annual Allowance (known as the AA)!!
It is irrelevant if you are an active member or a deferred member of the NHS Pension(s), you will still be accruing benefits in the scheme(s) which will count for AA purposes. Again you can find out what you have contributed by asking the benefits team to send you a pension allowance statement.
This will show the pension opening and closing balance less employer pension contributions, the difference revalued by inflation is how much you have put into the scheme for AA purposes. It is not the amount stated on the total reward statement.
Ok so now we have all the facts, we can do some calculations to see what actually you will get in retirement, and whether you will subject to the annual allowance (AA) or Lifetime allowance (LTA) tax charge. If you are then it may be an idea to speak to your accountant and or financial adviser to see if anything can be done to minimize these taxes, for example protection or carry forward……
Finally if you are planning to slow down from the NHS and you were a member of the 1995 / 2008 pension, read the following link. This link explains whether you can protect your salary (when it was higher), which can then be used to calculate your pension income at retirement;
So 2 Vlogs just dusting the surface on pensions, I hope it has given you some clarity on what you have, what you need to be aware of and what you should do going forward. It is not pretty and it is confusing. The NHS pension website does give you loads of information; however it may be worth getting advice to give you peace of mind and clarity.
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