| One of the recurring themes we deal with
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| | - Higher earners paying more towards
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| as financial planners is the subject of
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| | their pension - so 6% now could go to
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| buying more NHS Pension benefits.
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| | 8.5% for example, although likely to be
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| This is now worth a revisit as the
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| | tiered
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| situation is probably changing again! For
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| | - Earnings cap to disappear for high
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| the punch drunk amongst you, we will try
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| | earners so more of your pay is
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| to keep this as painless as possible.
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| | pensionable
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| To be serious for a moment though, these
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| | - A new facility to be able to "buy" up
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| decisions are often fundamental to your
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| | to £5,000 per annum unrelated to service
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| future standard of living and comfort in
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| | history
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| retirement, as well as the options to
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| | - The scrapping of the 40 years maximum
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| semi retire or retire earlier, so it's
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| | service rule!
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| worth taking the time to ensure you are
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| | As if this is not enough, we must
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| making the right decisions.
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| | remember the new Pension A Day rules that
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| Traditionally it has always been agreed
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| | came into force in April. These give new
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| that the basic NHS Pension Scheme is
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| | rules on contributions and benefits, and
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| unbeatable, and that is still the case.
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| | introduced a new Lifetime Allowance of
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| However, what about 'making up' for lost
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| | £1.5 million in today's terms. If you
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| benefits or attaining the 'magic 40 years
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| | build up a larger pot there may be a tax
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| service'?
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| | penalty chargeable.
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| What is the best way in which you can do
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| | Let's take a deep breath and see where
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| this?
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| | this takes us.
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| Well, the choices to date have been:
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| | Summary
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| Added Years
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| | Aren't we all pleased that the 'pension
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| Here, for a percentage of your pay, you
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| | simplification' rules and proposed NHS
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| can buy extra years service. For many,
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| | Pension changes have made it so much
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| this is a good route as:
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| | easier for you doctors and dentists to
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| -They are guaranteed defined benefits and
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| | make an informed decision?
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| so risk free
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| | No? You cynical lot!
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| -For married people they enhance your
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| | As we can see it is even more complex
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| protection for life and illness cover as
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| | than ever, and echoing the do nothing of
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| well
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| | above, we would share two things for now:
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| But some would argue:
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| | 1. If after discussing your circumstances
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| -They are inflexible as once started you
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| | with yourself, a planner or significant
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| are committed to them
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| | other, you do decide to buy more pension,
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| -Seen as "expensive" by some (typically
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| | the added years route or similar looks
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| 4-9% of your pay)
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| | more attractive.
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| Additional Voluntary Contributions
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| | Why?
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| These are "in house" with the NHS
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| | Well, the ability to take more tax free
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| (Standard Life, Equitable Life and
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| | cash will be looked upon favourably by
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| Prudential) or you can buy them as "Free
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| | most, and therefore boosting benefits
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| Standing" policies with an insurance
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| | here would "add to your basic pot" and
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| company of your choice.
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| | mean more tax free cash.
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| Advocates of such schemes would say:
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| | 2. Do nothing - for many of our clients
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| -They are flexible as to what you
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| | in their 50's this is the case. Once we
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| contribute
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| | have analysed their cash flow projection
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| -Have the potential for growth over added
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| | based on their wealth built up over the
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| years if the stock markets perform
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| | years and measured against their goals,
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| But equally:
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| | time after time if they have 35 years
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| -Since they are investment based there
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| | service plus, their model shows they will
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| are no guarantees
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| | be fine presuming they have some
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| Do Nothing
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| | investments and debt has been handled
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| This may be due to confusion, "I can't
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| | well. So there is a real danger that
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| afford it" or sheer apathy.
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| | money could be 'wasted' by investing in
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| However, it may be the "best" option for
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| | more pension.
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| you, especially if you are in your 50's.
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| | There are many alternatives available,
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| The new proposed NHS Pension changes (if
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| | including investing in ISAs, giving to
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| approved) will come into effect in 2008,
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| | the children or simply spending more
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| and will have a huge impact on a scheme
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| | themselves.
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| largely unchanged since 1948.
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| | The Financial Tips Bottom Line
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| You can read more at:
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| | Choosing the right options for your
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| For brevity these changes include:
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| | pension planning is about to become (in
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| - Ability to take more tax free cash from
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| | 2008) even more complex. Take your time
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| your pension
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| | with any decisions you make and don't be
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| - Abatement of pension on returning to
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| | afraid to ask for expert advice as
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| work and part time work whilst taking
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| | getting this wrong could cost you dearly.
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| pension benefits
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|
