What to Expect from NHS Pensions

What to Expect from NHS Pensions

While all citizens of the UK who pay Tax and National Insurance receive a state pension upon retirement, most employers offer their workers an additional pension to ensure they have enough money to live off during their retirement years. The National Health Service is the UK’s largest employer with 1.3 million people working for it. As such, the NHS also has one of the largest pension schemes in the UK ,with all employees who work directly for the NHS eligible to receive it after retirement. The NHS Pension Scheme has gone through significant changes since 2008, when the normal retirement age was extended from 60 years to 65 years for both men and women. For those that have joined the NHS since 2008, the pension is based on the average salary earned during employment and everybody who starts working for the NHS is automatically enrolled as a member of the pension scheme.

The NHS Pension Scheme is linked to pay and length of service. All benefits are also linked to inflation so increase each year as inflation goes up. As well as providing a pension upon retirement, the NHS Pension Scheme also pays out life insurance if an employee dies before retirement. This is paid to a nominated member of the employee’s family or to the estate upon death and is normally twice the annual pay. Membership to the NHS Pension Scheme is voluntary so employees can opt out anytime they wish, there are also provisions to allow early retirement from the age of 50, although the payments for early retirement is lower as the pension is paid earlier and for longer.

The members of the NHS Pension Scheme pay contributions from their salary. The level of contributions vary depending on the amount of salary the employee earns but ranges between 5% for employees earning less than £21,175, to 8.5% for those earning over £110,274. The actual percentage paid for contributions actually works out lower than these figures as all contributions are eligible for Tax and National Insurance relief. While the NHS Pension Scheme is voluntary, and employees can opt out and not pay these contributions, few do so as the pension scheme is regarded as highly valuable and very generous compared to pension schemes in the UK’s private sector. It has been estimated the NHS Pension Scheme is worth about 20% of a person’s salary, much higher than equivalent schemes.

The NHS pay pensions to over 660,000 former employees and as the NHS is a government body, all contributions paid in by members is perfectly safe and guaranteed, regardless of changes to the economy or government. While pensions are normally paid out as a monthly figure upon retirement, the pension scheme also permits people to take a proportion of their pension as a lump sum, up to 25% of the pension’s value. While this will reduce the amount of pension paid each month, a lot of employees opt to do this to assist with purchases such as a new home or to relocate abroad after retirement.

on 21.09.11 by Robert Steen