When you work in the UK as an NHS doctor, you will likely wonder what happens at the pension age. After all, you want to ensure that when you can no longer work, you have the money to live comfortably! To do so, you will need a good pension, which requires saving money throughout your working years. Fortunately, the NHS makes saving for retirement easy with its own NHS pension scheme.
When you work for the NHS, you can become part of a specific NHS pension scheme for healthcare professionals. That involves paying a contribution rate from your income, which the NHS tops up. As an IMG you might not see yourself retiring in the UK and therefore wish to opt out of your pension contributions. Don’t worry, this is ok too.
It should be noted that there was a significant change to NHS pensions in April 2015, meaning there are now two types of NHS pensions – those on the 1995/2008 scheme and those who are members of the 2015 pension scheme. In this article, we will focus primarily on the latest scheme, which you will be under when you join the NHS!
The 2015 NHS pension scheme is called a Career Average Revalued Earnings Scheme – commonly referred to as the CARE scheme. It started in April 2015, but some NHS employers stayed on the older scheme under protection arrangements.
With this scheme, you get a guaranteed level of benefits once you retire. The pension you receive will be the amount of pensionable pay during the year. It is based on a specific formula.
When under this scheme, you will pay contributions based on your earnings. Naturally, the more you earn, the more contributions you will make. Here are the four ways you will build up your pension over the years:
Under the 2015 NHS pension scheme, your build-up rate is a fraction of your pensionable pay, 1/54th of your pensionable earnings. So, if you earn £30K of pensionable earnings, 1/54 of that would be just over £555, which would go into your pension. So the more money you make, the more you’ll save for retirement.
Each year, there will be an increase in the amount of pension you get. How much depends on the rate determined by Treasury Orders as well as an additional 1.5%. Then, those two rates get added up. For example, if the Treasury Order determines the rate to be 1.5%, then the total of your pension that would be revalued would be 3% (1.5+1.5). This rate will be revalued for the following scheme year.
Of course, how much pension you build up depends on how long you stay in the pension scheme. You can stay in the NHS pension scheme until the age of 75. However, you can access the pension before that time.
How much you earn significantly influences how much pension you will build over time. So, if you ever take on a lower-paid job in the NHS, you can expect to build up less pension during those years. On the other hand, if your pay increases, so will the amount of pension you save.
It’s only pensionable earnings that count towards your pension, though. Pensionable earnings include your salary, wages, and fees you get from working for the NHS, but it does not cover overtime or bonuses.
Anyone who works for the NHS and is between the ages of 16 and 75 can be a member of the scheme. That includes a wide range of people in NHS employment, including dentists, nurses, general practitioners, general medical practice staff, freelance locum doctors, and more. You are eligible for the NHS pension scheme as an IMG working as an NHS doctor.
Yes, you can opt-out at any point in your career. To do this, you will fill out the NHS Pension Scheme Form. You can always rejoin later if you still meet the criteria.
You might wonder what happens if you leave the NHS or the UK. Of course, when you leave the NHS, you won’t benefit from the NHS pension scheme anymore. There are two options here:
You can request an NHS pension refund, which will refund all of the contributions made by you. You will need to complete the RF12 application form. It usually takes between 5-10 working days to receive your refund.
If you want to leave the NHS but stay in the UK, you can transfer your pension amount to a different UK pension provider.
You may have heard the phrase ‘lifetime allowance’ in relation to pensions and wonder what it means for you as a member of the NHS pension scheme. The lifetime allowance is a set amount of money that you can put into your pension before it is subject to additional tax payments. At this moment in time (the 2022-23 tax year), the lifetime allowance stands at £1,073,100. That means once you reach this threshold, any earnings over that amount will have to pay a 25% tax.
Many NHS employees still find it worthwhile to build more pension than the lifetime allowance, as it still contributes to more earnings once you retire.
After building up so much money over the years, you might wonder when you can retire and collect your pension. That depends on the scheme you’re under. If you’re part of the 1995 scheme, you can collect your pension at age 60. If you’re under the 2008 scheme, you can collect it at 65. You can also collect it at either age 65 (or state pension age) when a member of the 2015 NHS pension scheme.
When working for the NHS, we recommend joining the NHS pension scheme, as it sets you up for retirement. With a mix of your contributions and contributions made by the NHS, you can enjoy comfortable living when you retire.
If you’re about to start your journey towards working in the NHS and would like to know more about life in the UK as well as keep up to date with all the latest medical job vacancies the get in touch.
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