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