Taking some of NHS pension at 55

rev229

Ok so I’m confused. I have 3 parts to my NHS pension. I had a career break  of 7 years so the large sum is in the 1995 section then I have the 2008 and the 2015. I’m was/am thinking of retiring at 55 taking my 1995 bit ( lump sum and monthly allowance) and then carrying on working for a while before I give up completely if my health condition means I can’t work. However I’m i correct in thinking that taking the lump sum and monthly allowance means that I’ll be taxed on both my salary and pension each month? 

I’m now thinking it’s best just to leave it all in the pension pot for the time I can no longer carry on.
as I had a career break I can take the 1995 section, work and still pay into the other 2 sections and then take at a later date. 

Any advice welcome.Thanks

Marcon

rev229 said:

Ok so I’m confused. I have 3 parts to my NHS pension. I had a career break  of 7 years so the large sum is in the 1995 section then I have the 2008 and the 2015. I’m was/am thinking of retiring at 55 taking my 1995 bit ( lump sum and monthly allowance) and then carrying on working for a while before I give up completely if my health condition means I can’t work. However I’m i correct in thinking that taking the lump sum and monthly allowance means that I’ll be taxed on both my salary and pension each month? 

I’m now thinking it’s best just to leave it all in the pension pot for the time I can no longer carry on.
as I had a career break I can take the 1995 section, work and still pay into the other 2 sections and then take at a later date. 

Any advice welcome.Thanks

The lump sum is tax free, your pension is added to your other taxable income and will be taxed monthly.

Korkyb

I'm in a similar position in that I'm 55 next year and was considering taking my NHS Pension at 55 and continuing working part time. ( I've now achieved part of that plan & am now part time  ).

I don't have special status (which allows you to take the full pension without any reduction at 55) & assume that due to your break in service you won't have special status either.

This means that if we want to take our pension early before our Normal Pension Age (1995 section being 60) then we will have a reduction of pension which equates to (very roughly) 4% for each year it is taken early. (any lump sum due is also reduced).

As has already been mentioned the pension is treated as income and is added to any part time pay and taxed.

Therefore taking your pension early means it will be reduced by both the actuary reduction for taking it early and yby the fact that more tax will be paid on pension + wage than on pension alone.

I've decided that as I can live on my part time wage that I wont take my pension at 55 but will hold off for a few years longer when both the pension & lump sum will be larger.

One point that is worth being aware of is that the 95 scheme pension is based on the best 12 months of your last 3 years pensionable pay.

This means that if your pensionable pay is likely to reduce in your last 3 years it may be worth taking the pension early to make sure your pension is maximised.

For most people this wont be the case unless changing jobs / reducing your grade but worth keeping an eye on.

Your health / life expectancy a major factor in deciding when to take your pension - (no sense in knocking your pan in till 60 if you are likely to keel over at 61 !!).

german_keeper

Another thing to bear in mind if you think you might be able to afford to partially retire is that NI is not payable on pension income. I partially retired at 54, my gross income with pension and PT wages is virtually the same as FT gross. My net total however is about £100 per month more now that I am PT due to not paying NI on pension. If you just work out 12% of your pension income that will tell you how much higher your net income will be. This assumes your gross figure will be about the same as FT earnings. And  of course the pension is actuarally reduced for the rest of your life.