Is Your NHS Pension Worth Over £1 Million?
HM Revenue & Customs have a set way of calculating the lifetime value of pension income from schemes such as the NHS Pension. According to their methodology, your pension is worth over £1 million if you have accrued income benefits of more than:
The amount of pension income you have accrued to date is confirmed on your Total Reward Statement. On the page headed ‘Annual Benefit Statement’ look at the first table headed ‘Standard Benefit’. The number to look at is the Pension figure in the ‘Current benefits on 31/03/2016’* column.
*Note statements as at 31 March 2016 are expected to be available from late August.
If you have a £1 million+ pension, unfortunately it’s not all good news. The Lifetime Allowance for pensions is currently £1 million and benefits in excess of the allowance are subject to a Lifetime Allowance charge. This is a tax charge of 55% if the benefits are taken as a lump sum or 25% (plus your normal income tax) if taken as income.
If you have other pensions outside of the NHS, bear in mind the £1 million allowance is to cover all of your pension benefits. So if you have a Personal Pension worth £100,000, you will be affected if the lifetime value of your NHS Pension is over £900,000. You could therefore be affected by a Lifetime Allowance charge if your accrued NHS Pension income is lower than the amounts listed above.
If you require help calculating the value of your pensions for Lifetime Allowance purposes please contact Richard Higgs, Chartered Financial Planner, on 0117 966 5699 or email@example.com. We can also advise on whether protection against a Lifetime Allowance charge would be available in your circumstances.