Take pensions and carry on working

SummerSolstice

I hope you can help me.  I will be 60 in June and have three pensions that are all defined benefits schemes with 60 as the normal retirement date.  They are all final salary pensions.  One is a teaching pension in the old scheme, one with a retailer and one with a bank.  I am still working and my employer is the NHS.  I have been with them for over 6 years and with this scheme I will get the pension when I am 67 as it is in the new scheme.

My question is about whether I should take all the three pensions in June so I get access to the lump sums and income each month or hold off.  I could do with the money to make home improvements but I read that if I take them I could only have £4k going into my NHS pension each year.  Is that correct as my pensions are defined benefits schemes rather than defined contribution.  I've tried reading up on it but it's not that clear.  Apart from salary the only other real benefit in the NHS is the pension so I'd be reluctant to come out of it but if it means paying more tax maybe I should.

Any advice would be much appreciated.  Thank you.

Dazed_and_C0nfused

SummerSolstice said:

I hope you can help me.  I will be 60 in June and have three pensions that are all defined benefits schemes with 60 as the normal retirement date.  They are all final salary pensions.  One is a teaching pension in the old scheme, one with a retailer and one with a bank.  I am still working and my employer is the NHS.  I have been with them for over 6 years and with this scheme I will get the pension when I am 67 as it is in the new scheme.

My question is about whether I should take all the three pensions in June so I get access to the lump sums and income each month or hold off.  I could do with the money to make home improvements but I read that if I take them I could only have £4k going into my NHS pension each year.  Is that correct as my pensions are defined benefits schemes rather than defined contribution.  I've tried reading up on it but it's not that clear.  Apart from salary the only other real benefit in the NHS is the pension so I'd be reluctant to come out of it but if it means paying more tax maybe I should.

Any advice would be much appreciated.  Thank you.

Where have you read that?

With most DB schemes there is no benefit in delaying payment past the NPA but you would have to check the rules for each scheme to be certain (they usually don't pay anything for the period after NPA if you choose not to take the pension then).

Marcon

SummerSolstice said:

I hope you can help me.  I will be 60 in June and have three pensions that are all defined benefits schemes with 60 as the normal retirement date.  They are all final salary pensions.  One is a teaching pension in the old scheme, one with a retailer and one with a bank.  I am still working and my employer is the NHS.  I have been with them for over 6 years and with this scheme I will get the pension when I am 67 as it is in the new scheme.

My question is about whether I should take all the three pensions in June so I get access to the lump sums and income each month or hold off.  I could do with the money to make home improvements but I read that if I take them I could only have £4k going into my NHS pension each year.  Is that correct as my pensions are defined benefits schemes rather than defined contribution.  I've tried reading up on it but it's not that clear.  Apart from salary the only other real benefit in the NHS is the pension so I'd be reluctant to come out of it but if it means paying more tax maybe I should.

Any advice would be much appreciated.  Thank you.

If you are currently contributing to a defined benefit scheme (the NHS scheme is just that), the £4K a year limit has no impact on you. In any case, the limit doesn't apply if you are taking a pension/tax free lump sum from a DB scheme (although occasionally the waters are muddied if you access an AVC which is defined contribution...but as you are paying in to a DB scheme, you have no need to worry now about that).

Whether you should hold off taking your DB pensions now depends on a number of things, including how that would impact on your tax position; whether they have a 'late retirement' factor (i.e. if you don't draw your benefits at the normal retirement age for the scheme in question, are your benefits increased because they are being paid later than expected); whether having a bumper spend now on home improvements might impact on your standard of living in later years.

SummerSolstice

Thank you for the replies.  I’m in the 2015 NHS pension which is defined contribution.  My understanding is that the earlier 1995 and 2008 schemes were defined benefit schemes.  I can’t remember where I read it but it was something about preventing recycling where pensions are taken to live on and then contributions to the current pension scheme is increased to £40k to take advantage of tax break.  It was a while ago when I read it so it may be out of date.  Any insight gratefully received.

Kim1965

SummerSolstice said:

Thank you for the replies.  I’m in the 2015 NHS pension which is defined contribution.  My understanding is that the earlier 1995 and 2008 schemes were defined benefit schemes.  I can’t remember where I read it but it was something about preventing recycling where pensions are taken to live on and then contributions to the current pension scheme is increased to £40k to take advantage of tax break.  It was a while ago when I read it so it may be out of date.  Any insight gratefully received.

All your pensions are db. I think your getting confused with dc pensions

Dazed_and_C0nfused

SummerSolstice said:

Thank you for the replies.  I’m in the 2015 NHS pension which is defined contribution.  My understanding is that the earlier 1995 and 2008 schemes were defined benefit schemes.  I can’t remember where I read it but it was something about preventing recycling where pensions are taken to live on and then contributions to the current pension scheme is increased to £40k to take advantage of tax break.  It was a while ago when I read it so it may be out of date.  Any insight gratefully received.

That is a Defined Benefit scheme.

Why do you think it is a DC scheme?

hyubh

SummerSolstice said:

Thank you for the replies.  I’m in the 2015 NHS pension which is defined contribution.  My understanding is that the earlier 1995 and 2008 schemes were defined benefit schemes.

The 1995 and 2008 schemes were 'final salary', the 2015 scheme 'CARE' (career average revalued earnings). However both final salary and CARE schemes are 'defined benefit' (DB) not 'defined contribution' (DC). 

SummerSolstice

Thanks for the replies that’s really helpful.  I think I got confused and thought because the NHS 2015 scheme is not final salary that it’s not a defined benefit scheme.  Could I then take my pensions at 60 but increase my contributions to my NHS pension to reduce the amount of tax I pay at 40%?

Flugelhorn

SummerSolstice said:

Thanks for the replies that’s really helpful.  I think I got confused and thought because the NHS 2015 scheme is not final salary that it’s not a defined benefit scheme.  Could I then take my pensions at 60 but increase my contributions to my NHS pension to reduce the amount of tax I pay at 40%?

I am not sure that you can increase the amount you out into a pension in the NHS - it is a fixed figure depending on your earnings. It is frustrating but think of it all as a bonus getting the pension and the salary!

I took my NHS pension then worked for them for a couple of years. Everything I earned was taxed at 40%, there was nothing I could do about it but at least I got 60% of the money

spaniel101

Currently, you cannot take your 1995 scheme at 60 AND continue active membership in the 2015 scheme.

However, there is an on going government consultation (due to close on 30.01.23) introducing further nhs pension flexibilities, one of which would reverse this and allow you to take your 1995 scheme at NRA (or earlier) AND continue active membership in the 2015 scheme.  If this goes ahead, its possible it would be implemented from late spring 2023.

https://www.gov.uk/government/consultations/nhs-pension-scheme-proposed-amendments-to-scheme-regulations/nhs-pension-scheme-proposed-amendments-to-scheme-regulations   (see Pensionable Re-Employment section)


This would also then allow you to, not only be an further active member of the 2015 scheme, but also purchase additional pension/ERRBO/or MPAVC's etc (in addition to your regular pension contribution).   This would then further reduce your 'Taxable' pay (easiest to purchase in instalments).

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

spaniel101

Apologies SummerSolstice, I appreciate your old pensions are not nhs 1995/2008 schemes, and that your are only i the 2015 scheme, so perhaps the beginning of my previous post doesn't apply to you personally.


The latter, 2015 scheme additional pension info does however.