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Alternatives - The State Pension Scheme
Personal Pensions | The State Pension Scheme
The State Pension Scheme has two parts.
Flat-Rate Basic Pension
This is paid at State Pension age, currently 60 for women and 65 for men. Between April 2010 and 2020, State Pension age will change to 65 for everybody. The basic pension you get depends on your National Insurance contribution record.
An Additional Earnings Related Pension
This is known as SERPS (State Earnings Related Pension Scheme). The amount you get depends on your earnings since April 1978 on which you have paid NI contributions.
Members of the NHS scheme do not pay anything to the earnings related part of the State Pension Scheme. This means you will only get the flat-rate retirement pension from the State, unless you have contributed to SERPS in another employment.
The benefits you will get from the NHS scheme will normally be higher than those from SERPS. The NHS scheme is contracted out of SERPS under the 1995 Pensions Act. This requires the NHS scheme to meet a statutory standard by giving benefits that are broadly equivalent to, or better than, those in a ‘reference scheme’.
For scheme members with service before 1 April 1997, we guarantee that your NHS pension will be at least as much as the SERPS part of the State pension would have been. This guaranteed amount is called the Guaranteed Minimum Pension.
State pensions are index-linked.
Remember that:
- NHS scheme members qualify for a flat-rate basic pension based on their contribution record, though they are contracted out of SERPS.
- There are fewer benefits under SERPS and they are likely to be lower than those of the NHS scheme.
What does it cost?
You will pay the full rate of NI contributions.
You will not get any tax
relief on this additional contribution.
Key points
If you are in any doubt about the right choice for you, get independent financial advice.
The essential thing to remember is that you should make your pension arrangements as early as possible in your working life. Delay will make it more expensive to ensure adequate arrangements later.