On the 1st April 2015, 75%* of existing NHS employees and all new NHS Pension members will join the new 2015 Scheme.
You’ve no doubt already read vast amounts of information about this transition but what about the fine print details? In case they’ve passed you by, here are 5 points you need to be aware of.
1. Loss of Enhanced Protection and Fixed Protection 2012 and 2014
Whilst this is more likely to impact those who are within 10 years of retirement, there are a few exceptions. Enhanced Protection, Fixed Protection 2012 and Fixed Protection 2014 are initiatives that have been put in place by the Government for individuals who expect to exceed the £1,250,000 lifetime pension allowance limit.
Because the 2015 NHS Pension Scheme is a new scheme, not a new section of an existing scheme, these protections will be lost when a member joins or moves to the 2015 Scheme and starts paying pension contributions. If you have concerns regarding this, we strongly recommend you contact your financial adviser.
2. Important changes to Transfers Out
It is seldom advisable to move your pension out of the NHS Pension Scheme, unless it is to a similar scheme. For those who wish to return to your country of birth or have visions of retiring in a far flung continent, moving your NHS Pension with you just got difficult!
From the 6th April 2015, a transfer of pension benefits from the NHS Pension Scheme to a Defined Contribution (DC), such as a private pension scheme, is no longer allowed.
3. Salary sacrifice
In the 2015 NHS Pension Scheme, your pension benefits are based on your actual pensionable earnings each year, as opposed to your final salary.
What this means in practice is that any salary sacrifice arrangement you have in place (including Childcare Vouchers, Lease Car Schemes, etc) will reduce your pensionable pay and thus the pension you accrue each year. You may get tax advantages in any given tax year, but at the cost of a smaller pension.
4. Introduction of an ‘Early Retirement Reduction Buy Out’ (ERRBO)
Instead of specifying a retirement age, the new 2015 NHS Pension Scheme has a link to the State Retirement Age. Where previously you had options to enhance your pension by purchasing additional years, you now have the ability to buy your way out of a penalty if you want to take early retirement.
This ERRBO will allow you to draw your pension at age 65 (but no earlier) without penalty. We have yet to see the penalties or the costs of the buy out, so watch this space…
5. Estimate of GPs’ (and non-GP providers’) pensionable income
The amount you contribute to your pension is based on your superannuated income. The higher your income, the more you pay into your pension. A lot of GPs that I’ve spoken to have seen their incomes fluctuate in recent times; of those who haven’t, many expect it will.
Every GP Practice, SPMS Contractor, and APMS Contractors should, by now, have informed their local area team of NHS England or Local Health Board in Wales of the estimated pensionable income of their GPs and non-GP providers.
If your estimated pensionable income hasn’t been provided or is incorrect, too little of your income may be paid into your pension and you may have to make up the difference at a later date. It’s worth checking.
The idiom ‘the devil is in the detail’ certainly couldn’t be truer when it comes to medical and dental professionals transferring to the 2015 NHS Pension Scheme!
Don’t let your retirement plans get derailed. Make sure you’ve got a clear understanding of all the fine print in the mountain of 2015 NHS Pension paperwork you’ve received.