Thinking About Early Retirement? - What you need to know
Doctors who are considering retiring early must plan ahead or face receiving a reduced pension income for life.
Members of the NHS Pension Scheme can take early retirement at any time between reaching minimum pension age and normal pension age. For example, 1995 Scheme benefits can be taken between age 55 and 60.
However, the pension will be actuarially reduced to reflect that it is being paid before normal pension age. The reduction depends on which scheme you are a member of and the age you want to draw your pension, as an example if 1995 Scheme benefits are taken at age 55 the pension will be reduced by 21% and the lump sum will be reduced by 14.4%.
Early Retirement Reduction Buy Out (ERRBO)
Members of the 2015 Scheme can pay additional contributions to buy out the reduction that would apply on retirement before their Normal Pension Age. This is known as an ‘ERRBO agreement’.
However, the agreement can only be for early retirement one, two or three years before the Normal Pension Age and no earlier than age 65.
From a financial planning point of view, it may not be desirable to take NHS Pensions before the normal pension age as the pension benefits will be permanently reduced by the reduction factor.
There are other options available if you want to retire early and not draw your NHS pension until normal pension age.
For example, we can help you to build a financial ‘war chest’ in savings and investments to enable you to afford to retire at the age of 55 but not receive your pension until you are 60.
If you are within the pension Annual Allowance this might include making contributions into a personal pension, which allows you to draw your benefits at age 55.
To find out more about your options please contact Richard Higgs CFP FPFS on firstname.lastname@example.org or 0117 966 5699.
Please note this article does not constitute personalised advice.