Now you're contributing to the NHS Pension Scheme, make sure you understand the benefits.
Am I a member of the NHS Pension Scheme?
Anyone who starts working for the NHS automatically becomes a member of the NHS Pension Scheme. Although you can opt-out at any time, the scheme provides a number of worthwhile benefits that are expensive to replace.
What are the benefits of the NHS Pension Scheme?
The NHS pension is a very good scheme compared to private policies. It provides three main benefits and you will definitely use one of these at some point in your life.
Retirement pension
The first benefit is a retirement pension linked to your NHS earnings, which pays an income guaranteed for life. You can also take an optional lump sum at retirement in exchange for a reduced pension income. It's a Defined Benefit scheme which means you know how much pension you will receive - it isn't reliant on the stock market so is much more secure. This sort of scheme is rarely available in the private sector.
Ill health retirement pension
If you have to retire early due to ill health - the amount you could receive depends on whether you are unable to continue to work in your current job or whether you can't work at all.
Death in service
A pension is provided for a bereaved spouse and dependent children if you die whilst in service.
How much does it cost?
The amount that you contribute varies depending on your earnings.
- As a salaried junior doctor, it's likely that you will contribute 6.5% of your pre-tax earnings
- The NHS also contributed 14%, which means for every £1 you contribute, they put in £2.15
- If you are earning £30,000, you will contribute £130 each month, but due to the benefits of tax-relief, your effective contribution is £162.50
The Department of Health has set out plans to increase contribution levels from 2012. Almost all newly qualified doctors are expected to pay an additional £25 per month after tax relief, but even so, the NHS Pension Scheme remains very good value.
What happens if I opt-out of the scheme?
If you opt-out of the NHS Pension Scheme, your benefits will be lost or reduced.
Although the benefits can be replaced with a combination of pension, savings and protection products, they will be costly and any personal pension is unlikely to provide the security of your NHS pension.
What are the downsides?
There are limits to the amount of pension benefits you can build up without paying a tax charge. It's important to review your pension situation annually with a Financial Consultant to make sure you don't go over the limits as you could end up with a tax bill. Read our
guide to pension changes for more details.
How can I find out more?
Your Wesleyan Medical Sickness Financial Consultant is an NHS pension expert. To find out more about how your pension works or how you might maximise the benefits, contact us today to
arrange a no-obligation meeting.