How does your NHS Pension Scheme fit into your retirement plan?
The NHS Pension Scheme is an important part of your retirement plan. You will either be a member of the 1995 or the 2008 Final Salary scheme, but more recently may have moved across to the 2015 Career Average Revalued Earnings (CARE) scheme.
The most significant change in the 2015 scheme has been the move from a fixed retirement age (i.e. 60 on the 1995 scheme and 65 on the 2008 scheme) to the State Pension Age (SPA).
Depending on the section of the scheme of which you are a member, there are different rules as to what lump sum or pension income you will receive. The different rules can make the NHS Pension Scheme seem very complex so it is important to seek professional independent advice to identify which options suit your particular circumstances.
The scheme does, however, also contain a high degree of flexibility. There is the opportunity to pay additional voluntary contributions, opt for an early retirement reduction buy out, go part-time, even buy back previously refunded benefits but all these options come with their own implications or penalties in some cases. Great care also needs to be taken with the additional options when it comes to the Annual and Lifetime Allowances as potentially significant tax charges may be levied if the Allowances are exceeded.
The NHS Pension may not be the only source of income in your retirement. You will receive the State pension too and it’s likely that you’ll also have ISAs, possibly some private pensions and other savings.
These days, a ‘pension pot’ doesn’t just come from a pension. It can be made up of a variety of investments and savings. You may also have income to consider from other sources, for example, if you have taken the decision to move and downsize or if you have received an inheritance. Both of these can potentially mean a sizeable amount of money to add to your retirement fund.
If you’ve contributed to more than one pension scheme over your career, one of the main challenges can be trying to keep track of the values, benefits and options relating to each of them.
To be able to make key decisions about when you want to retire, though, and determine whether you will have enough money to maintain the lifestyle you want, it’s important, to be able to take a holistic overview of all your assets and get a realistic picture of how your retirement could look. It could be that you can retire sooner than you think or you may need to put more money away each month, but at least you will know your position.
This is what we do at Medical Money Management. We specialise in helping healthcare professionals pull together a full picture of their financial positions, so they can start making informed decisions about the future. It means you can finally sort out all of those savings you know you’ve got ‘somewhere’ and start making proper plans.
If you’d like to know how your NHS Pension fits into your overall retirement planning, we’d be happy to explore the options with you.