LONDON (Citywire) - The introduction of a new National Health Service final salary scheme will create opportunities for financial advisers as thousands of staff consider whether to change their existing pension arrangements.
Last week the NHS announced that its final salary pension scheme would continue but with some changes, while it would introduce a new more flexible final salary scheme for new joiners.
Members now must choose whether to remain in the scheme or switch to the new NHS scheme.
They must also decide whether to buy “additional years” as this option will no longer be available after April next year.
The new scheme is more flexible as it allows members to retire at age 55 and take a lower pension or even take part of their pension while building more entitlement by working in a less demanding job.
But unlike the existing schemes, tax-free cash is not paid automatically, so taking a lump sum will reduce the value of the pension fund.
Meanwhile, those planning to retire in the next three years have three choices of pension scheme depending on when they choose to retire. Members who retire on or before March 31, 2008 will be subject to existing rules and benefits, while the updated rules and benefits will apply to those that retire thereafter.
The new NHS Pension will only be available to members who retire on or after July 1, 2009.
The NHS said in a guidance note to scheme members: “The pensions division cannot, by law, advise you on your options. For advice, you are recommended to contact an independent financial adviser.”
Trevor Smith, director of Broadstreet IFA, said: “What’s interesting is you’ve got members of the scheme currently who are going to be offered the opportunity to switch scheme, which won’t be an easy decision and they will have to seek advice on that.”
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