1. Paul Ham paul@paulham.co.uk

2. 1. How is your pension calculated? The 1995 Section The 2008 Section 2. Increasing your pension Added Years Additional Pension 3. The Annual Allowance 4. The Lifetime Allowance 5. The 2015 Pension Scheme

3.  Officer Pension ◦ Final Salary Scheme  Practitioner Pension ◦ CARE Scheme (Career Average Revalued Earnings)

4. Final Salary (best of last 3 years) Total service (days) 29,200 Your Annual Pension

5.  At Age 60  Total Service 26 years 128 days  Final Salary of £42,000 Pension = £42,000x9,618/29,200 = £13,834 Tax free lump sum is 3 times the pension: £13,834 X 3 = £41,502

6. You can increase your lump sum up to a maximum of 25% of the capital value of your pension by exchanging £1 of pension for £12 of additional lump sum. Maximum exchange from previous example = Maximum Lump sum £73,785 (from £41,502) Reduce Pension £11,068 (from £13,834)

8. This GP has 4 years 223 days pre-practitioner service (1,683 days) and first became a practitioner 01/06/2002. The Estimate is dated 31/12/2013 therefore the total practitioner service is 11 years 214 days (4,229 days). The total pensionable sevice is 5,912 days. Pension = (£1,374,419.38 x 1.4%) / 4,229 x 5,912 = £26,899pa Lump sum = £80,698

9.  Full pension calculation exactly the same but then abated.  Abatement factors are monthly  Abatement is for the life of the pension  Once taken Voluntary Early retirement cannot re- join the pension scheme  Widows/widowers pensions would be based on full unabated pension value  The same for Officer or practitioner schemes

10. Using earlier example of an officer pension. Decides to retire at age 58. Final salary £40,000 Service 24 years 128 days (8,888 days) Full Pension £12,175 Full lump sum £36,525 Age 58 VER Pension Abatement factor = 0.908 Age 58 VER Lump Sum Abatement factor = 0.939

11. Pension = £12,175 x 0.908 = £11,055 Lump Sum = £36,525 x 0.939 = £34,297 Maximum Lump Sum = £59,617 Reduced Pension = £8,945 Widows Pension = £6,087.50

12.  Normal Retirement age of 65  1/60 th Scheme  No Automatic lump sum  Can re-join scheme after taking benefits

13.  Added Years Scheme no longer available however existing contracts honoured  Increased Benefits can be purchased in £250 blocks up to a maximum of £5,000  Increased benefits can be paid for monthly or in a lump sum however care should be taken if electing to pay by lump sum as it can create an annual allowance tax charge.

14.  Represents the amount that a pension can grow before being subject to a tax charge.  Growth in Private schemes is the amount of gross contributions paid.  NHS pension contributions are NOT growth  Sum of all pension growth is assessed against the allowance  Current allowance is£50,000pa reducing to £40,000pa from April 2014  Can carry forward unused allowances for 3 years

15. Earlier example full pension value at 58 with an annual salary of £40,000 was £12,175pa. Has pay rise due to promotion to £47,000 which mans that the pension at the end of the year is £14,894. Growth calculation: Opening balance = (£12,175 x 19)x1.022 = £236,414 Closing Balance = £14,894 x 19 = £282,986 Growth = £282,986 – 236,414 = £46,572

16. Basic calculation is the same as for an officer. A practitioners pension is however based on dynamised earnings which uses a different inflation rate than the growth calculation. Opening value = (£26,193x19)x1.022 = = £508,615 Assuming that CPI at 5% (Dynamisation 6.5%) and earnings of £90,000 Closing value = £29,943x19 = £549,917 Growth = £41,302

17.  The limit of the capital value of your pension at retirement before tax charges are applied.  Capital value = (pension x 20) + lump sum  Any excess annual pension charged at 25%  Maximum allowable lump sum is 25% of allowance  Any excess lump sum charged at 55%  Can be mitigated against through pension commutation.  Current allowance is £1.5m reducing to £1.25m from April 2014

18.  Fixed protection (FP14) ◦ Must be applied for before 5 th April 2014 ◦ Provides personal fixed lifetime allowance of £1.5m ◦ Any benefit accrual will cancel the protection ◦ Holders responsibility to notify HMRC of benefit accrual or could be liable to penalties  Individual protection (IP14) ◦ Can be applied for in the 3 years after 5 th April 2014 if total personal pension provisions exceed £1.25m at that date ◦ Provides personal protection equal to the capital value of pension provisions at 5 th April 2014 (up to a maximum of £1.5m) ◦ Benefit accrual rules do not apply ◦ Any Pension accrued after 5 th April 2014 will be subject to charges

19.  Normal retirement age increasing to 68  Everyone moving to career average revalued earnings scheme (CARE)  Full relief available for those with less than 10 years to their current NRA at 31/03/2012  Tapered relief for those with between 10 years and 13 years and 6 months until their NRA  1/54 th scheme  No automatic lump sum  Does provide the facility to commute

20.  Members may wish to reassess retirement plans as a result of the 2015 scheme  Another chance to change to the 2008 scheme before transferring to the 2015 scheme  2008 scheme has NRA of 65  Provides flexibility to continue scheme membership  NHS Pensions to provide choice 2 paperwork to those eligible

21. Paul Ham paul@paulham.co.uk

22. Disclaimer: The content of this presentation is for information purposes only. There are a number of exceptions that can be applicable to all scenario’s outlined within this presentation and therefore clarification on any points should be sought from an accountant, independent financial advisor or directly from NHS Pensions. The presentation is merely a prompt and some important information may have been provided verbally therefore the presentation is not to be taken in isolation. Again clarification of any part of this presentation should be obtained from the professions listed above.