The NHS pension scheme for GPs and Doctors – what you need to know

This article explains some of the main differences between the different NHS pension schemes for GPs and doctors.Medical practitioners fit into your own area of the NHS pension scheme, as detailed below. The scheme is a final salary pension, and all benefits are indexed in payment.

 NHS pension scheme for GPs and doctors sections

  • 1995 section (the ‘old’ scheme) This is based on 80ths of salary for scheme members at 31/3/08.
  • 2008 section (the ‘new’ scheme) This is based on 60ths of salary for new starters after 1/4/08.

Member contributions (2012-13)

  • 5% to 10.9% depending on pensionable earnings:
    • Up to £21175 – 5%
    • £21-176 to £26557 – 6.5%
    • £26558 to £48982 – 8%
    • £48983 to £69931 – 8.9%
    • £69932 to £110273 – 9.9%
    • £110274 and over – 10.9%

This is based on full time equivalent annual pensionable pay. Some on call payments are included in these figures. It is estimated that your employer puts in around 14% of your earnings into the scheme.

Retirement income paid

Medical practitioners earn pensions based on your earnings throughout your career. These are revalued to maintain their current value as Career Average Revalued Earnings (CARE). This is known as your uprated earnings. Your earnings for each year in service will be revalued and added together to give an uprated earnings figure.  Your earnings for each year of service are revalued by 1.5% above the annual increase due.  The resulting total is multiplied using the percentage rate below depending on the section you are in.

  • 1995 section
    • Pension based on 1.4% of uprated earnings per year.
    • This is based on the best of the last 3 years pensionable pay.
    • Option to take increased lump sum by giving up pension.
  • 2008 section
    • Pension based on 1.87% uprated earnings per year.
    • This is based on an average of best 3 consecutive years in the last 10.
    • No automatic lump sum but there is an option to give up some pension in exchange for this.
  • Example
    • Uprated earnings of £1,500,000 over a GP’s working life
    • 1995 section – multiplied by 1.4% to give an annual pension of £21,000 per year plus a lump sum of £63,000;
    • 2008 section – multiplied by 1.87 % to give an annual pension of £28,050 per year. Some of this pension can be given up in exchange for a lump sum.

Uprated earnings are the final value of pensionable earnings after adding all the year’s earnings and applying revaluation factors.

Retirement lump sum

  • 1995 section 3x annual pension. You can exchange some pension for more cash.
  • 2008 section You can exchange part of pension at retirement for cash up to 25% of the ‘capital’ value.

Normal retirement age

  • 1995 section – 60
  • 2008 section – 65

Pensionable pay

Pensionable earnings from NHS work. This includes payments for unsociable hours but no travel expenses, waiting list initiative payments or overtime.

Death in service

2x average annual pensionable earnings. Spouses and civil partners are automatically recognised. You should nominate unmarried partners using form PN1. At the time of death the person to benefit may have to prove financial interdependence. Death benefits must be claimed withing 2 years to avoid tax.

Voluntary early retirement (VER)

This is available to anyone over the minimum retirement age so long as your pension exceeds the Guaranateed Minimum Pension (GMP).

  • 1995 section – 50 (55 for joiners after 6/4/06)
  • 2008 section – 55

In both cases your pension would be reduced.

Ill health retirement

You must have 2 years pensionable service to qualify. If you are unable to carry out your current duties you can receive pension benefits accrued. If you are unable to carry out any employment you can receive enhanced pensions.

Flexible retirement (24 hour retirement)

You have 3 choices:

  • Wind down – reducing your hours (which would reduce your retirement benefits accordingly)
  • Step down – to a less demanding role but would preserve the benefits already accrued at the higher salary
  • Retire and come back– take the accrued benefits and return to work after the required break
    • If you work less than 16 hours per week the minimum time is 1 calendar month plus 1 day;
    • If you work more than 16 hours per week the minimum time is 1 day (24 hour retirement)

Each of these 3 options would need to be agreed with your employer.

How to apply for benefits from the NHS pension scheme for GPs and doctors

Complete the Application for Retirement Benefits – AW8. This form should be submitted at least 4 months prior to the intended retirement date. This is to allow the Pensions Agency time to perform certain calculations. Your lump sum would be paid on the first date of retirement, and you would then be allocated a pension payment date for monthly payments.

How can financial planning help medical practitioners?

If you are a GP, doctor or consultant you will no doubt have important decisions to make, perhaps in conjunction with your accountant.  Many medical practitioners find that their NHS pension benefits have accrued so that they are nearing the allowable retirement limits.  If this applies to you financial planning can help you to examine the benefits and options open to you between the various choices you will need to make about your retirement benefits.  If you are considering making changes to your NHS pension scheme membership you can only take decisions confidently once you have examined all the options.  Financial planning can help put your decisions into context.

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