Latest NHS Pension Scheme Learning Zone (15)

Do you have an Added Years Contract? Today we explore Added Years and the implications of all the recent pension changes on your Added Years Contract.

Added Years Contracts - An Introduction

Added Years was only available in the 1995 NHS Pension Scheme (it is not available in the 2008 or 2015 NHS Pension Schemes). It provided doctors with the option to maximise their NHS Pension Scheme membership up to their Normal Pension Age. The option to purchase Added Years Contracts was withdrawn on 31st March 2008 however of course existing contracts are still in force. Added Years contracts were taken out by purchased lump sums or by regular investment. The maximum you could pay towards an Added Years Contract was 9% of your pensionable pay.

The total membership you are allowed in the 1995 NHS Pension Scheme is 40 years at age 60 (age 55 for MHO members) and 45 years overall. Therefore any Added Years contract is restricted to these limits.

Increasing Your Pension Through Added Years

By taking out an Added Years Contract doctors can increase their pension, lump sum and dependant benefits.

- If you are a hospital doctor, each added year provides an extra 1/80th of your final pensionable pay at retirement

- If you are a GP, your average annual dynamised earnings during the period of the purchase will be multiplied by the amount of the years bought. This amount is then added to your total dynamised earnings in your career. As usual, your total career earnings is then multiplied by 1.4% to calculate your pension.

For both Officers and GPs a lump sum will be payable of three times your added years pension.

Tax Implications of your Added Years Contract

Your Added Years contributions will attract tax relief at your highest rate of income tax up to 100% of your UK earnings in the relevant tax year. This then, on the face of it, makes Added Years a very tax efficient retirement strategy. However, increasing your pension through Added Years can also mean you breach the Annual Allowance and/or the Lifetime Allowance. 

In the terms of the Annual Allowance, any Added Years purchased in a tax year will contribute to your growth in pension benefits in any one year. This will mean that you are more likely to breach the Annual Allowance and therefore have to pay an Annual Allowance tax charge.

Similarly, in terms of the Lifetime Allowance, purchasing Added Years will increase your benefits and therefore the capital value of your 'Pension Pot' which makes it more likely to then breach the Lifetime Allowance and therefore have to pay a Lifetime Allowance charge.

Leaving, Cancelling, Opting Out, Ill Health, Death

You are now able to cancel an Added Years contract at any time in writing to the NHS Pensions Agency. However remember you cannot restart the contract if you stop and your eventual pension benefits will be less as you will have paid in less than originally anticipated. 

If you have a break from the NHS Pension Scheme of under 1 year then you are able to come back and re-start your Added Years contract. If you come back and rejoin the NHS Pension Scheme after 1 year  you will not be able to resume your AddedYears contract and you will only receive benefits at retirement for the amount of contributions you actually made.

If you retire through ill health prior to the age of 60 your Added Years contract will be paid in full for you and no further cost to youand you will be credited for all the Added Years you originally elected to purchase.

If you die before the age of 60 and you were contributing to an Added Years contract, the contract will be paid in full and added to the benefits payable to any dependants. This will be based on the pension that would have been paid had you retired on health grounds as at the date of death.

If you decide to take early retirement before your Added Years contract was due to be completed you will be credited with the portion of the contract completed at the date of retirement and this will be actuarially reduced to reflect its early payment.

Recent NHS Pension Changes

If you have an Added Years contract you will be able to continue to pay into it even after you transfer to the new 2015 NHS Pension Scheme. The contract will then continue to provide benefits under the current 1995 Section rules. These benefits will become payable at the contract end date irrespective of whether your retire at this time.

If you chose to move your NHS Pension benefits to the 2008 Scheme your Added Years contract would have been terminated and you will only be credited with the contributions made up to the date of transfer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

More News
Can doctors trust the rising market? Monday, July 23, 2018
Quote Mark
  • "We have been very impressed with the personal service, attention to detail and comprehensive evaluation of our financial circumstances. We would certainly appreciate ongoing help and support from Richard over the future." Jason Kendall (Consultant in Accident and Emergency), Southmead Hospital
  • "Richard provides a very convenient and personal service. Richard has good knowledge and has the ability to go through reasoning for any recommendations." Tim Mitchell (GP), Montpelier Health Centre
  • "Richard provides an excellent service, prompt and flexible. Although the level of technical knowledge is impressive, answers to our questions are presented in a straightforward manner, without overwhelming us with information." Mary Gainsborough (Consultant in Paediatrics), Southmead Hospital
  • "Richard gives me an excellent personal service in my own home. His advice and explanations have been excellent. Richard also has excellent technical knowledge – who wouldn’t be happy?" Charles Record (GP), Frome Valley Medical Centre
  • "Richard provides an excellent, personal service. He responds very quickly and attentively to queries and very much keeps me up to date with important matters that affect me - such as the latest changes to pensions, investments and taxation. Recommendations are delivered in a timely, effective manner - usually face to face in my own home." Professor Gianni Angelini (Head of Cardiothoracic Surgery), BRI
  • "It is very convenient for me to be seen at home and Richard is very flexible with timings - especially when unexpected things crop up at the hospital. Meetings are friendly and relaxed with my long-term best interests very much at the heart of discussions." Professor Gianni Angelini (Head of Cardiothoracic Surgery), BRI
  • "We have found it far more reassuring having a local adviser rather than a national firm. We have found the service excellent and Richard answers all the questions we want answering. Richard's technical knowledge is excellent, he has detailed knowledge of pensions." Paul Male and Helen Lewis (GPs), Thornbury Health Centre
  • "The personal touch counts for a lot and the willingness to visit us at home is much appreciated. Richard provides an excellent, friendly, accessible service, not encumbered by jargon or salesmanship." Professor Peter Mathieson (Honorary Professor of Medicine), University of Bristol
  • "I can recommend Richard as providing measured, balanced independent financial advice. He listens very carefully and tailors advice appropriately in a knowledge-based manner. He is very accessible and gives his clients time and clarity in order to make the most sensible decisions for themselves based on the available facts." Andrew Medford (Consultant in Respiratory Medicine), Southmead Hospital
  • "Richard now knows me and understands my financial position. I have complete trust in his advice. The level of service I have experienced is second to none. We have received regular reviews in our own home, speedy and thorough advice to any queries." John Rees (General Practitioner, Specialist in Urology ), Blackwell and Nailsea Medical Group
  • "The advice I have received has dramatically altered my personal protection policies for the better and reduced my personal tax liability." John Rees (General Practitioner, Specialist in Urology ), Blackwell and Nailsea Medical Group
  • "I appreciate Richard's local knowledge and the fact that he is in contact with a lot of local general practitioners which is useful for networking. He is also very knowledgeable about the different pension schemes and their pros and cons." Fiona Hayes (General Practitioner) Bristol University Student Services
  • "I have enjoyed the process of dealing with a local advisor and it has not felt like a box ticking exercise. The service has been excellent. The great flexibility to come to my home at a time suitable to my working day has set this company apart from others I have dealt with in the past. The technical knowledge provided has been expertly tailored to my requirements and financial situation. The manner in which it has been delivered has also been first rate. " Beth Harrison (General Practitioner) Montpellier Health Centre
  • "We have regular meetings with the same adviser who knows our profile and keeps our requirements in mind with the plans he makes. The reviews are simple to organise and are always at a convenient time and location." Mike Bould (Orthopaedic Surgeon) Western General Hospital
  • "The service I have received from Wealth West is excellent! they are more personable and accessible than large firms and are not pushy at all. They also have a very good breadth and depth of knowledge." Billy and Annie Headdon (Anaesthetics and Intensive Care Trainee, General Practitioner) Montpelier Health Centre
  • "My experience of the service has been excellent. I have been able to ask many questions and have received excellent advice on my financial situation. The technical knowledge of Wealth West Medical is excellent. Anyone who can help my investments grow in the current environment clearly knows what they are doing. I would highly recommend Richard and Wealth West Medical." Linda Buczek (General Practice Manager) Bishopston Medical Practice
  • "The technical knowledge of Wealth West Medical is very good. Richard keeps up to date with the changes to the NHS pension scheme and new legislation." Melanie Lockett (Consultant) Southmead Hospital
  • "Wealth West Medical offers a friendly, helpful and efficient service. Richard keeps in touch at regular intervals and has a very good knowledge of pensions and investments." Rachel Brown (General Practitioner) Montpelier Health Centre
  • "Richard comes to my house for meetings and it is nice to see a familiar face. He remembers my details, and advises over the long term. Richard has a detailed understanding of my particular pension plan and has explained this very clearly to me. He has also helped me to manage tax payments for annual allowance and pension protection." Hugh Herzig (Consultant Psychiatrist) Southmead Hospital
  • .