Guide to Financial Protection for NHS Doctors
As an NHS Pension Scheme member, your spouse, civil partner or qualifying partner* would be entitled to certain benefits in the event of your death:
· A lump sum, typically 2 x salary
· A survivor’s pension, typically 50% of your accrued NHS Pension
· Children’s pension if you have any children, typically 25% of your accrued NHS Pension until they reach age 23 (or older if they have a condition that means they are unable to earn a living)
The lump sum and survivor’s pension are confirmed on your Total Reward Statement. While it is comforting that your family would receive something from the NHS, it is important to consider whether this is likely to be sufficient to ensure your family’s financial security long term without you. In particular the pension income is likely to be significantly lower than your earned income.
*Note if the relationship is not a legally recognised relationship, there is a form to complete to register the relationship. Evidence of financial dependency or interdependency will be required in the event of a claim.
Options to offer your family greater protection in the event of your death are:
This would pay out a lump sum in the event of your death. Typical uses for this are to pay off a mortgage, provide funds for a house move (e.g. to be closer to other relatives) or cover other large anticipated expenses in the event of your death. A lump sum might also be desirable simply to provide financial security at this time.
Family Income Benefit
This type of plan would pay a series of lump sums over a fixed number of years as a kind of replacement income in the event of your death. This is a way of protecting your family from a loss of income and associated fall in standard of living and is particularly useful if there are school and or/university fees to pay or other large household expenses.
It is also important to consider how you and your family would cope if you were unable to work long term due to illness or injury.
The NHS provides sick pay of 100% salary for the first six months then 50% salary for the next six months. While short term (less than 12 months) ill health is well covered, if you remain unwell after 12 months you will stop receiving sick pay. It is possible to apply for ill health retirement; however, you will only be eligible if your condition is permanent (meaning it will prevent you from ever returning to your job). Note also that an ill health pension is likely to be at a much lower rate than your earned income.
To cover the gaps, your options include:
Income Protection Insurance
This would pay you an income, usually at the rate of around 80-90% of your earned income, until your recovery (or retirement age if sooner). You can choose a ‘deferred income’ so it starts when your NHS sick pay stops. You do not have to have a permanent condition to claim; the income will continue until you are well enough to return to work. You can claim again if you have another period of sickness before retirement age.
Critical Illness Cover
This pays a lump sum if you are diagnosed with a critical illness such as heart attack, cancer, stroke, or kidney failure, or require a major organ transplant or coronary artery by-pass surgery. This can be used as you wish to help you adjust to your change in circumstances for example by making adaptations to your home or clearing mortgages or other debt to take the pressure off.
To talk about your personal protection requirements and setting up the policies you need please contact Richard Higgs, Chartered Financial Planner, on 0117 966 5699 or email@example.com.