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Freezing NHS Pension

Q: I am 57 and wonder if I can freeze payments into my NHS pension until l am 60 when I propose taking 24-hour retirement. I want to retire completely at 63. Can I pay an equivalent amount into a self-invested pension plan (SIPP) and claim tax relief until 63?

A: Members can opt out of the NHS Pension Scheme (NHSPS). Your scheme benefits in deferment would be increased each year in line with inflation as measured by the Consumer Prices Index.

The NHSPS provides guaranteed benefits that can be very valuable and attractive when compared with the less certain returns from investment-based schemes such as SIPPs.

Members who are considering opting out of the NHSPS should therefore obtain personal financial advice before doing so. As part of this you should find out if it is likely the £50,000 annual allowance for tax-relievable pension payments will impact on your plans.

Note too that the lifetime allowance for tax-advantaged pension benefits at retirement will be reduced from £1.8 million to £1.5 million with effect from 6 April 2012.

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