Whatever stage you find yourselfat in your dental career, pensions and the prospect of planning for your retirement are an ever-present concern.
If you are an NHS practitioner, you will no doubt be aware of the NHS Pension Scheme to which you will have been automatically enrolled, and towards which you and your employer will make contributions.
The scheme has caused some degree of controversy in recent times, with many high earners especially finding they are having to pay more, and for longer. This, in conjunction with reduced Lifetime and Annual Allowance figures means some professionals are quitting the NHS Pension Scheme completely. But are they right to do so?
The 2008 Section
One of the most significant changes to the NHS Pension Scheme has been the split between those who registered and made contributions to the scheme before 1 April 2008, and those who registered after. Depending on which part of the Scheme your pension falls under will affect your entitlements and the benefits you can enjoy. If you are unsure which section your pension falls into, you should contact your employer or visit www.nhsbsa.nhs.uk/pensions.
Contributions and Benefits
As a Scheme member you pay a pension contribution based on your pensionable pay that will fall into one of four bands depending on how much you earn. The more you earn, the higher your contribution may be, while the NHS will also contribute a flat rate of 14%.
For Dental Practitioners, the 2010/11 bands are as follows:
|Tier||Pensionable Pay in 2010/11||Contribution Rate in 2010/11|
|1||Up to £21,175||5%|
|2||£21,176 to £69,931||6.5%|
|3||£69,932 to £110,273||7.5%|
It should be noted that contributions are taken from your pay before tax, so you will be receiving tax relief on any amount you pay. For example, if you are a basic rate (20%) taxpayer, and you invest £100 into your pension you will in fact only be paying £80 because this is the amount you would have ‘taken home’ after tax.
While the tax-free incentive may well be true for whichever pension scheme you decide to take advantage of, the NHS Pension Scheme also includes a number of additional features including the ‘Death in Membership’ benefit and option to take early retirement if forces out of work through illness. Permanent injury benefit (PIB) may also be payable if an injury causes a significant decrease in your percentage earning potential.
NHS Benefits at Retirement
As well as the above-mentioned features, members can enjoy a number of other benefits associated with the NHS Pension Scheme. When you finally come to retire as a dental practitioner you can expect to earn a pension based on your career earnings and the length of time you have been a part of the scheme. This is known as a Career Average Re-valued Earnings (CARE) pension, and is re-valued so as to maintain the pension at its current value. In addition, the NHS Pension Scheme will give members of the 1995 Section a lump sum on retirement equivalent to x3 this figure.
There is also the option to allocate part of your pension to provide a bigger pension for any dependant on your death. While this decision cannot be reversed once it has been made, this option can prove extremely satisfying in giving you that extra peace of mind.
If you should choose (of your own wish) to take early retirement, your yearly pension and your lump sum (if you are eligible) will be reduced by a percentage figure based upon how far away you are from official retirement age. If you are part of the 1995 scheme, you can choose to do this from the
age of 50. If you are part of the 2008 scheme, you may only choose to take early retirement after 55.
If you have at least two years membership and are too ill to work in your present job you may be able to retire early and take your pension benefits, depending on how serious your illness is. If you can’t carry on working in any form, you may be eligible to take your pension early based on the accrued pension benefits to the time of the claim in conjunction with potential accrued benefits earned up to official retirement age.
Ways to Boost Your Pension
If you choose to stick with your NHS Pension, there are a number of ways you can boost your pension, and Independent Financial Advisors such as money4dentists will be able to offer you honest, impartial advice so you can make the best decision for you and your family.
Some of the options available to you include:
- Starting contributions to a Self Invested Personal Pension(SIPP)
- Buying an additional pension through the NHS Pension Scheme
- Paying into an AVC Paying into an NHS Stakeholder Plan
Naturally, each of these options has advantages and disadvantages, so it is never a good idea to rush into a decision without giving each option thorough consideration. Planning for your future is, after all, one of the most important decisions you can make, so it pays to consider all your options carefully.
For more information please call 0845 345 5060, email info@money4dentists or visit www.money4dentists.com