It is certainly not a decision to be taken lightly. In fact, it is unlikely that opting out would be in your best interests. However, here is a summary of the main considerations plus an example of a doctor who may consider this a viable option.
If you feel that that you may like to, at least consider, opting out - then please get in touch for a proper financial review. This decision requires cash-flow forecasting, considering 'what-if' scenarios and a consideration of many other factors which you may not have thought of.
For most doctors considering opting out of the 2015 NHS Pension Scheme you will still continue to be employed by the NHS. You have built up benefits within the 1995 Section and the 2008 Section (up to April 2015) and this is a summary of what actually happens to those benefits.
The options are broadly as follows:
- Option One: Leave the benefits in the Scheme and take your deferred benefits at your Normal Pension Age (have to have at least 2 years membership).
- Option Two: Transfer your benefits to another pension scheme like a personal pension.
- Option Three: Take a refund of contribribution (if under 2 years membership).
If you are staying in NHS employment but wish to opt out of the Scheme:
- Use form SD502 to apply (return to your payroll department)
- Use cash flow planning to highlight the effect on your take-home pay and future pension benefits
- Please note that because of Auto-Enrolment, if you do opt-out of the NHS Pension Scheme, your employer will automatically enrol you into another alternative pension arrangement - and so you will have to actively opt-out of this pension too if you would like to start making private retirement provision arrangements.
- Remember, if you opt-out of the NHS Pension Scheme you may lose important life insurance and family benefits.
You can leave your benefits in the scheme and they become payable from your Normal Pension Age.
Your deferred benefits will increase by inflation each year until your Normal Pension Age - the inflation factor is set by the Government and is currently linked to the Consumer Price Index (CPI).
Your benefits will become deferred automatically. There is no need to actually apply.
Your deferred benefits can then be claimed at your Normal Pension Age which is 60 for those in the 1995 Section and 65 for those in the 2008 Section.
You are able to take your deferred benefits earlier than your Normal Pension Age however please remember your benefits will be reduced because of the fact they will be paid out longer.
Should you die or become ill before or after taking your deferred benefits then life insurance, family benefits and ill-health retirement pensions can all be paid out from your NHS Pension.
You are able to transfer your entire NHS Pension benefits to another registered pension scheme - however certain conditions apply. Please speak to us for for details.
Notwithstanding the above, new Governent pension legislation will effectively ban pension transfers from unfunded public sector pension plans (i.e the NHS Pension Scheme) from April 2015. Therefore if you would like to transfer your NHS Pension benefits - now is the time to act.
In the first instance ask us for the NHS Pension Transfer Out guide and application pack.
The normal reason for a refund would be if you have less than 2 years of membership within the NHS pension scheme. If you think you qualify for a refund then apply using form RF12. Remember - you only get your personal contributions refunded - not the employers contributions.
If you are thinking about opting out of the 2015 NHS Pension Scheme it would be a good idea to arrange an initial meeting to explore all of the pros and cons of this decision. Contact us on firstname.lastname@example.org or 0117 966 5699.
A typical doctor who might want to at least consider opting out of the new 2015 NHS Pension Scheme would be a doctor:
- Currently in the 1995 Section
- Have no protection from the 2015 NHS Pension Scheme (i.e will automatically be enrolled in the 2015 Scheme from 1st April 2015)
- Who wants greater control over their own retirement plans and wants to still work towards retiring at 60
- Does not want to work on to State Pension Age and beyond
- Is worried about projected life time allowance and annual pension limits and would like more control over managing these
- Is worried about the state of NHS finances going forward and the on-going affect that might have on NHS Pension benefits and the contributions that may be required to keep them.
- Is open to alternative tax efficient investments like personal pensions, ISAs and VCTs which they could potentially access much earlier than state pension age.
- Or maybe a doctor who is a GP Partner who currently pays both employee AND employer NHS Pension contributions.
If this seems like you, or might be you, then please get in touch on email@example.com or 0117 966 5699 for a proper review of the options before deciding.