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Boosting NHS pension

Q: I am 62, a full-time salaried GP and have been employed by my PCT for the last six years. Before that I worked for 14 years in NHS hospitals before that for 10 years as a private consultant in India. I have also been buying NHS Pension Scheme added years for the last eight years. I am also doing two ad hoc sessions for the PCT every week and not contributing for these to my NHS pension. If I contribute for these extra sessions in one of my last three years before I retire at 65, will it benefit my pension? Does the final year salary count from the last tax year or from the last birthday?

A: You should check with your employer but provided the ad hoc sessions you refer to are NHS pensionable, then making contributions will help to boost your NHS pension at retirement.

Practitioners (including salaried GPs) earn an NHS pension based on GP earnings, which are then revalued to maintain a current value. This is known as a Career Average Revalued Earnings pension.

In the 1995 section of the NHS scheme (for members who joined before 1 April 2008), the accrual rate is 1.4 per cent for the pension and 4.2 per cent for the automatic tax-free lump sum. So, if total revalued earnings at retirement were say £2,000,000, then the GP pension would be £28,000 and the tax-free lump sum would be £84,000.

For other NHS employments, pension benefits within the 1995 section of the scheme are calculated based on pensionable service and the best of the last three years of pensionable pay.

The accrual rate is 1/80th service multiplied by pensionable pay for the pension and the automatic tax-free lump sum is three times the pensionable amount.

For example, if the service amounted to 20 years and the best pay in the last three years was £65,000, then the pension would be £16,250 and the lump sum would be £48,750.

In addition to your existing added years contract, subject to affordability there is also the scope to boost NHS pension benefits further by buying an NHS additional pension that was introduced last year.

It would be prudent to seek guidance from your financial adviser before making a commitment as there may be detrimental tax implications following the recent Budget announcement regarding the restriction of higher rate tax relief on pension contributions for high earners.

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