NHS Pension & Government changes

Balchroich

Hi, I was wondering if anyone has heard anything about possible changes to the tax free lump sum we get upon retirement. At the moment it is tax free but I have been told this may change in 2015, where it will be taxed. I have been working in the NHS for 37yrs and can't afford to loose any of it.
Thanks

alanq

There is an MSE board dedicated to Pension questions so you are likely to get a more useful response there.

http://forums.moneysavingexpert.com/forumdisplay.php?f=19

Anniehen_2

I would find it helpful to have thoughts on this too. My understanding is that it was muted in a report as one of many options. The Government has not alluded to any plan for this yet. I like to think that they wouldn't do it because it would effect their pensions (and those of their cronies) too, but that doesn't necessarily follow since they have managed to treat various groups differently in respect of pay rises and other changes to pensions (the judiciary).

Unfortunately, I will only have 32 years in the scheme next year at age 55. I have special class (Mental health officer) status, so I can go then. Staying an extra year would give me two (due to that status after 20 years), so financially it would be significant, but I'm tempted to go (and reduce some outgoings) before they drop a change on us with little notice at a Budget.

jem16

Balchroich wrote: »

At the moment it is tax free but I have been told this may change in 2015, where it will be taxed.

There has been absolutely nothing mentioned on the Public Sector schemes not having a tax-free lump sum option and it would need pension legislation to change for everyone, not just Public Sector schemes. This rumour crops up every so often and has been around for a long time.

dunstonh

The pensions board regularly gets questions asked about the tax free cash being removed by NHS workers. It is a myth. It seems to be floating around the NHS and has done for years. Some put it down to union mischief making whilst others put it down to vocal know-it-alls who know nothing but are believed by others and then it spreads out from there. Given the frequency that this pops up with NHS staff, I personally put it down to union mischief making.

There is no change to pension lump sums happening and none have been proposed or even hinted at.

Nick_C

Some of this fear may lie in a misunderstanding of changes made to the Local Government Pension Scheme. The (tax free) lump sum element was dropped in 2008, but at the same time the basis for calculating entitlement was changed from 80ths to 60ths, so actuarily there was no difference. The changes were not retrospective, so people in the scheme prior to 2008 still get some lump sum, people joining since 2008 get no lump sum.

Theoretically, the Chancellor could scrap the tax relief on pension lump sums, but I doubt that the Tories would risk losing the grey vote in this manner. And if they did, it would have to apply to all schemes, not just public sector ones.