Don’t sleep on your NHS pension
Featured Products Promotional FeaturesPosted by: Dental Design 11th December 2021
There are almost countless pension policies on the market for dentists to choose between, all of which offer unique perks, benefits and caveats.
But what about the perks of the NHS pension? If you have an NHS contract, this pension policy comes with a number of excellent benefits, many of which you may not have considered before:
Security in an uncertain world
Perhaps one of the biggest advantages of an NHS pension is the security that this policy brings. It’s an unwelcome thought, but there have been cases in the past of pension policy providers going under, resulting in people losing their pension pots. Pensions are subject to changes and regulations too, and a shift in these can have significant impact on your earnings. In fact, it was only earlier this year when an individual realised that, due to a rule change surrounding state pensions in 2008, she had effectively lost up to 14 years’ worth of earnings – a situation that is obviously far from ideal.
The NHS pension is safeguarded from these sorts of changes, and remains a predictable, reliable choice. One thing to bear in mind, however, is how the NHS will be changing in the near future.
After April 2022, all active NHS workers will be placed onto the reformed 2015 scheme. Legacy pensions (those before the 2015 iteration) will be closed, but it won’t impact any funds you have already accrued under these policies. For example, if you signed up to a 1995 NHS pension scheme and then later signed up to a further 2008 pension scheme, these will both contribute to your total pension benefits. Once the switch is made to the 2015 scheme, you may be drawing from three different pension schemes when it comes to retirement age.
Interestingly, you may be able to draw funds from each of these schemes at different times, depending on the clauses outlined in the scheme when you joined. For example, if you have funds in a 1995 pension scheme, you will be able to access these at age 60, while for later NHS pensions the age is 65. Depending on when you take your pension, this could mean that your total pension benefits are the sum of different figures generated by your multiple NHS pension schemes. This shows exactly how safe the NHS pension is as an option, as it reliably safeguards funds you have earned over the years when things change, even retaining benefits such as your final salary link (meaning that when you retire and it’s time to receive benefits from your 1995/2008 schemes, they will be calculated using your final salary) if applicable.[i]
Support for your family
Another excellent benefit of the NHS pension is that it offers extra support for your family and dependents. Acting as built-in life assurance, this aspect of the policy means that, in the event of your death, your chosen dependents will receive a tax-free lump sum of money. Of course, this sum will be reliant on whether you are still an active contributing member of the NHS scheme or whether you have already retired, but even if you are past retirement age your dependents can still claim money back if you have been in receipt of your pension for less than five years.
You can indicate the recipient of this lump sum or leave it to an organisation if preferred. If no one is nominated, this sum will automatically be given to your surviving spouse/civil partner or a qualifying nominated partner if you have one. How this lump sum is calculated currently depends on your circumstances at time of death, but under the 2015 NHS pension scheme it will be either two times the relevant earnings over the last 12 months of pensionable membership, or two times the revalued pensionable earnings for the scheme year (the highest amount over the last ten years) – whichever amount is greater.
This is a substantial perk as it ensures that no matter what happens, the funds you have earned are still beneficial to your nearest and dearest.
Tax free earnings
Tax can hugely impact your pension funds. In fact, some pension policies that may look good on paper might be considerably less beneficial on closer inspection, depending on how the tax is applied and what this means for any pay-outs in the future.
The NHS pension is tax free, which obviously gives it the edge over a number of other policies on the market. Plus, as your funds won’t be impacted by any unexpected taxes, you can plan more effectively for the future.
Always look for advice
Ultimately, the NHS pension is a great policy, but it is just one string on your bow when putting together a financial plan for the future. As such, it’s a great idea to seek independent, tailored advice to ensure that your plans are watertight. The expert, award-winning team of Independent Financial Advisers at money4dentists can help guide you towards the best pension options available to you, evaluating your individual circumstances and highlighting the policies that will perform the best for you.
Richard T Lishman
Managing Director of the 4dentists Group of companies
Richard who is from North Yorkshire moved to the Midlands over 20 years ago to start his career in Financial Services. He set up practice in the 90’s and subsequently co-founded ‘money4dentists’ which is a multi award winning firm and is widely recognised as the leading specialist IFA to dentists. Richard is well known within dentistry and has a Yorkshireman’s passion for saving money and tax, and passes on this valuable knowledge to clients.
Richard’s passion for helping clients gave him the idea to launch a “one stop” shop, and the 4dentists group was formed. The professional services group offers dentists advice on legal, tax, consultancy, practice sales & acquisitions, recruitment, insurance and training.
As Group Managing Director, Richard spends time educating the dental community lecturing around the UK and overseas as well as contributing regularly to the dental press on topics such as the Budget to the latest tax and financial changes. Richard is also a member of the Association of Specialist Providers to Dentists (ASPD).
For more information please call 0845 345 5060 or 0754DENTIST.
Email info@money4dentists.com or visit www.money4dentists.com
[i] NHS Business Services Authority. Your NHS Pension After April 1 2022. Link: https://www.nhsbsa.nhs.uk/changes-public-service-pensions/your-nhs-pension-after-1-april-2022 [Last accessed September 21].
