Just how good is your NHS pension?

Do you understand the benefits and true value of the NHS superannuation scheme for locum GPs?

Even if I had to pay the 14.5% employer's contribution personally, I would join the scheme in an instant. In fact, I have threatened some GPs with being sectioned under the mental health act for not being members of the scheme, which I think is a sign of how good it is, irrespective of any changes and tax charges.

There is a potential issue with regards to locums and paying the correct tiered contributions, and once the superannuable income is reconciled at the end of the year, you can be asked for extra payments.

I've also heard that some practices are refusing to pay the employers contribution, even though it is a legal requirement. Of course, if the locum is not actually within the scheme, or they are already in receipt of their NHS pension, then that is different.

I also know that some locums have set up limited companies to stay out of the scheme, as they've been 'advised' that it's better way of getting more income. The simple point here is that the limited company would not be an "admitted employer" under the terms of the NHS superannuation scheme, so can’t be in the scheme. So if a GP needs the money to live on, then having a limited company is of minimal benefit! You can use limited companies to avoid the employee’s contributions, but the downside is a lower pension on retirement.

What I tend to suggest is that once you believe that you have accumulated enough pension to provide a comfortable retirement, then you should consider your options. I have just had a GP retire under the 24hr rules who had big problems with the Lifetime Allowance and the Annual Allowance. He was 58, and I compared taking the pension now compared to staying in the scheme until 60. I then worked out he would have to live until 77 to break even, so guess what he did! So it’s not a question of never leave the scheme; it’s a question of when is it best for me to consider leaving.

This is where individual advice is required. So, is it simply a question of the best mathematical answer, or the best quality of life answer, and this must be provided by an independent qualified person who is regulated by the Financial Conduct Authority and can deliver objective advice. Seek specialist advice so you can make an informed decision regarding your pension. ●

This article was first published in the December 2014 edition of The Sessional GP Magazine.

Kevin Walker

Kevin Walker, NHS Pension Specialist, BW Medical Accountants. Blackett Walker is authorised & regulated by the Financial Conduct Authority.

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12 Responses

  1. L-J
    Any suggestions as to what to do re: Choice 2 (i.e. decision to be made over staying in the 1995 section or moving to the 2008 section) of NHS Pension Scheme???
    • Kevin Walker
      Well you would expect me to say it depends! If you were not 50 as at the 01/04/2012 then you will be phased into the new 2015 scheme where the retirement date will be linked to your state pension age. If you were 50 or over then you still retain 60 so why give that up ? The 1995 scheme still has 60 as a retirement date. In 99% of cases, don't do it is the answer. I have transferred only 2 members into the 2008 scheme. One was a GP with a serious illness who we knew would retire at some point on tier 2 ill health retirement at some point. In that case the pension was enhanced to 65 rather than 60. The other case was an overseas doctor who came here aged about 50 with a young family who knew he had to work to at least 65, so it made sense. If you transfer and retire before the age of about 63 1/2 then the early retirement penalties outweigh the extra pension you get. Any service in the 1995 scheme will still be payable at 60 without penalty; it's only service in the 2008 or 2015 scheme that has a higher retirement date. Always take advice from a specialist. I am not advising just commenting as I don't know your personal circumstances.
      • Thanks Kevin, that's really helpful.
      • L-J
        Cheers Kevin, I've since spoken to my Financial Advisor and he said the same thing - i.e. STAY with the 1995 scheme.
  2. A Mehta
    'If you remain in the 1995 Section you will be unable to rejoin the 2015 Scheme if you retire and later return to work. If you choose to move your 1995 Section benefits to the 2008 Section under Choice 2 you will be able to rejoin the 2015 Scheme and earn further NHS pension benefits.' ---------------------------------------------------------------------------------------------------------- Re above clause in decision tree for choice 2: There could be two scenarios: 1) I leave the NHS pension scheme before 1/4/15 leaving accumulated benefits in 1995 section and stop paying any further contributions or 2) I continue to be member of NHS pension 1/4/15 onwards (retaining accumulated benefits in 1995 section and earning new benefits in 2015 section) If I then leave NHS pension in 2016. In 2022, I decide to return to NHS pension scheme again. Does above clause mean I would not be able to rejoin in any case or it only applies to scenario 1. Tx for your view on this.
    • kevin walker
      The 1995 scheme does not allow you to re-join if you have taken your benefits from the scheme. if you leave and defer your benefits and the break in service is more than 12 months then you would join the 2015 scheme from the 01/04/2015. People who access benefits under the 1995 scheme in my experience tend to do so because they are pushing against the lifetime allowance and have big problems with the Annual Allowance. So if they have accumulated enough pension to live on then why have more benefits payable at age 66 or 67 subject to penalties ? Again no advice given its just an opinion !
  3. A
    http://www.nhsbsa.nhs.uk/Pensions/4210.aspx The Pension Schemes Bill 2014/15 contains measures to restrict transfers out of unfunded defined benefit public service schemes, except to other defined benefit schemes, unless certain conditions are met. This means that transfers to DC schemes will no longer be permitted. -------------------------------------------------------------------------------------------------------- Does it mean that one can't transfer out accumulated NHS pensions to an HMRC registered SIPP after 5/4/15? Tx for your view on this in advance.
    • kevin walker
      The NHS scheme is unfunded and it its one of the biggest unfunded promises in the world ! So the Government are not going to permit transfers out of the scheme when there is no money in it. The same rationale applies to pensions in divorce. The spouse gets admitted as a member as there is no money to transfer. in any event the Cash Equivalent transfer value (CETV) does not cover the true cost od the benefits and I would find it hard to find and IFA who would recommend a transfer in any event.
  4. Lisa
    I read somewhere that only certain people are being offered 'choice 2'. I certainly haven't received anything about it in the post/via email etc. I graduated in 2005 and as far as I'm aware am still In the 1995 scheme as I have already resisted 2 attempts by them to convince me to change to 2008 scheme. Is there anything I need to do at the moment? Or just sit tight?! Thanks for any advice...much appreciated!
  5. subject to previous comments the Government are trying to get everyone they wrote to last time who did not transfer to transfer now. So everyone should be contacted the first letters were issued before Christmas so you should be contacted. Again I would find very few instances where it is in people best interests to transfer.
  6. Lisa
    Much appreciated thank you. Have just chased this up with pensions office who confirmed they sent a letter to me...it just got mislaid!
  7. Jo Morrice
    Hi, I want to make additional contributions to my pension - would you recommend making additional contributions to my NHS pension (on a defined contribution rather than defined benefit basis) or topping up my personal pension which is with Standard Life? Huge thanks for your help.

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