NHS pension Q&A

Introduction

You don’t need us to tell you how complex the NHS Pension Scheme can be.

With three different parts of the scheme in operation and different rules depending on what type of member you are, it’s not always the easiest thing to understand.

That’s why we’re answering your most-asked pension questions in our quickfire Q&A.

What happens if I decide to take a break from the NHS pension?

Whether you leave the medical profession and return years later or simply need to stop your contributions for a few months, it’s not uncommon to have a break in membership.

What happens when you take a break depends largely on how long you’re ‘away’. If you return within five years, you’ll usually re-join the 2015 scheme and any links between the 2015 scheme and any legacy scheme benefits will be reinstated. For example, final salary links.

If your break is more than five years, you’ll join the 2015 scheme and any historic benefits will be ring fenced and increased by inflation only.

What are the financial impacts of taking a break?

In the more immediate term, taking a break from the NHS pension while still in NHS employment will have a notable impact on your take-home pay. 

With no pension contributions coming out of your salary, you’ll certainly notice the difference – but what you might not notice is the employer contributions you’re missing out on. Also, with pension contributions not being deducted, your taxable pay will increase.

Opting out will also impact other benefits provided by the NHS Pension Scheme, such as death in service and ill health retirement options.

Tax treatment depends on your individual circumstances and may be subject to change in the future.

How does the NHS pension grow when it’s not invested like a private pension?

The NHS pension is a government-backed scheme that grows through annual inflationary uplifts and career-average salary accumulation. It increases annually in line with the Consumer Prices Index (CPI), plus an additional 1.5% while active.

Because it’s not invested, it offers more security to its members. Not being subject to market risk means members can be confident in receiving a guaranteed inflation-protected income.

When should I get pension forecasts and how often?

You can get an annual pension benefit statement from the Total Rewards Statement (TRS) website. It provides a comprehensive forecast of your pension benefits, including annual income and lump sum (if you have one).

While your forecast shows you what you’re expected to receive from your NHS pension, it’s only part of the pension picture. You could also have a private pension, savings or investments that will form part of your retirement fund.

If you want to know if you’re on track to meet your retirement goals, you may want to get a Pension Assessment Report. Not only will you get a projection of your NHS pension benefits and an assessment of your position in relation to the Annual Allowance, but you can see how any personal pensions you hold could affect your post-work funds and lifestyle.

Meticulously crafted by a Specialist Financial Adviser from Wesleyan Financial Services, the report also covers the potential effects of inflation and future market conditions.

How much do I need in my pension pot for retirement?

It’s the age-old question and our answer is there isn’t a one-size-fits-all amount. How much you need will depend on a few factors, including:

• Your plans for retirement
• Your current lifestyle (and the income you’re used to)
• Any fixed outgoings or financial dependants
• What age you plan on retiring
• Potential future costs (like paying for care or your grandchildren’s school fees)

We do have a guide to help you come up with a realistic number and we’d always recommend chatting through your finances with a Specialist Financial Adviser. Charges may apply.