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- Independent Advice
- NHS & State Pensions
- Retirement Planning
- Estate & Tax
- Risk & Protection
NHS Scotland Pensions
Most doctors and dentists rely on the NHS Pension Scheme to provide their main guaranteed pension benefits in retirement.
Over the last 10 years we have seen significant changes to the different versions of NHS Pension Schemes available to members, which now encompasses the 1995, 2008 and 2015 Sections of the Scheme as it is applied in separate geographical locations.
This means pensions have become more complex, especially when combined with challenging pension tax regulations, which impact most doctors and dentists due to their level of income.
The NHS Pension Scheme has a vast number of members, and from time to time, mistakes will happen – given the different Schemes that an individual consultants, dentist or GP might participate in during their career. Therefore, it is important to get an update on your NHS Pension statement each year – the Total Rewards Statement – and review this to ensure that your benefits are on track for when you wish to retire.
Staff joining NHS Scotland are now automatically enrolled in the NHS Pension Scheme administered by The Scottish Public Pensions Agency (SPPA).
Will the NHS Pension Scheme provide enough income for you to live on in retirement?
The last 5 years has seen significant changes to the NHS Pension Scheme – including Lifetime Allowance (LTA), Annual Allowance (AA) and Tapered Annual Allowance (TAA) – all impacting on more members.
It is therefore vital to review the benefits you anticipate from your pension on a regular basis.
- Does the NHS Pension Scheme still represent good value? (In our experience, the answer – in most cases – is ‘definitely’; but this should be reviewed in light of your personal circumstances.)
- A key consideration is when you plan to retire: is it still realistic to retire at age 60?
The impact of reduced allowances
The LTA is the limit placed on the amount of pension benefit that can be drawn from pension schemes, whether lump sums or retirement income. Exceeding it will trigger a tax charge at the relevant date.
The Annual Allowance is the total pension contribution that can be made in a given tax year, including your own contributions and those made by your employer. Exceeding it will trigger a tax charge in your next tax return.
This means many more existing members of the NHS Pension Scheme may be at risk of further tax charges. It is therefore essential to ascertain whether you need to protect your pension already accrued, in respect of the reduced LTA limit, and to understand the total contribution made to your pension by you and your employer, to protect against the AA.
One option for LTA, if your personal circumstances allow, is to apply for Individual Protection 2016 (IP16). If your pension benefits were valued above £1 million on the 5th April 2016, then you can protect your pension at the value on that date.
If applicable, this means your LTA becomes personalised (PLA).
For example, if your total pension benefits on the 05th April 2016 were valued at £1.2 million, that sum becomes your PLA. You then only have a tax liability on the excess of your pension savings above that protected amount at your date of retiral, (rather than the excess you’ve saved above the lower LTA, which applies if you do not have IP16 in place, or any other previous forms of LTA protection.)
You should bear in mind that the LTA will increase by inflation (CPI) each year.
At Medical and Dental Financial Planning Services we can advise you on which route you should take in terms of securing protection for your pension.
Our bespoke system allows us to project forward, using Lifetime Cash Flow Modelling; consider different scenarios and strategies you may employ when you wish to stop work; and advise on the most suitable methods for securing protection.
Please contact us, whenever you feel that our specialist NHS Pension advice is appropriate.