Why IDGs should learn to love the NHS Pension Scheme

International dental graduates (formerly known as Overseas Dentists) working for the NHS are entitled to take full advantage of the NHS Pension Scheme. It almost always makes sense to do so.

Dentistry in the National Health Service depends on international dental graduates (IDGs)and if you’ve come to the UK from overseas, it’s just as important that you make the best use of the NHS’s pension benefits as it is for home-grown dentists.

The good news about the NHS Pension Scheme is that it’s relatively generous, certainly compared to other occupational pension schemes in the UK. The downside is that the scheme can be quite complex. Still, it’s worth persevering – you’ll qualify for guaranteed benefits calculated with reference to your NHS earnings, and the NHS makes sizeable pension contributions on your behalf.

Three schemes in one
The first confusion to get comfortable with is that the NHS effectively operates three versions of its pension scheme at once. If you joined the scheme on or after 1 April 2015 (or have yet to join), you will be a member of the NHS’s 2015 Scheme. If you joined before 1 April 2008, you will be a member of the 1995 section of the NHS’s 1995/2008 Scheme; if you joined between these two dates, you will be a member of the 2008 section of the 1995/2008 Scheme.

Some IDGs may have pension rights in more than one of these arrangements. And just to add to the confusion, all active members of the NHS Pension Scheme have, from 1 April 2022, been members of the 2015 scheme, even if they were previously paying into one of the other arrangements.

The distinction is important because each of these three arrangements offers different benefits; in each case, your pension is guaranteed and salary-related, but the formula for calculating it varies. If you do opt out or leave the scheme for any reason, it’s important to consider rejoining within 5 years as this has the benefit of maintaining a final salary link in the 1995/2008 scheme if you work within the hospital. As a GDP you will also maintain something called dynamisation which is an extra increase on your pension which will also be lost if you remain out of the scheme for 5 years or more.

One final wrinkle here is that following a legal case – known as McCloud in the pensions industry – most NHS Pension Scheme members who joined before 1 April 2012 will have a decision to make when they start drawing their pension benefits. Broadly, for pension benefits related to years of membership between 2015 and 2022 service any service in the 2015 scheme has been ‘rolled back’ into the 1995/2008 scheme. However, at retirement you can choose to have the benefits calculated in accordance with the rules set out in the 1995/2008 Scheme or the 2015 Scheme – whichever suits them best.

Pension considerations for IDGs
Some IDGs may feel that the NHS Pension Scheme isn’t for them, particularly if they’re not planning on staying in the UK for an extended period or are thinking of working outside the NHS. However, it still makes sense to join the scheme – not least to take advantage of the contributions that the NHS offers – even for a limited time.

Even if you end up leaving the scheme after a short period, you won’t lose out. If you end your membership within two years, you’ll be entitled to a refund of your own contributions less tax.

In the meantime, joining the NHS Pension Scheme entitles you to death-in-service benefits – effectively a form of life insurance. IDGs working as locum dentists get these too during times when they are working for the NHS under a contract.

Equally, once you get to two years’ worth of membership, if you meet certain criteria you can qualify for ill-health retirement benefits, which entitles you to claim your pension early if you’re unable to work for health-related reasons. It can be useful to discuss the value of such benefits with an independent financial adviser, who may suggest you purchase additional income protection insurance, although this is only usually available after a period in excess of 18 months of working in the UK, but the NHS offer is a good start.

IDGs not expecting to retire in the UK should not be concerned either. You’ll be able to claim your NHS pension benefits from anywhere in the world at exactly the same time as you’d be eligible to start drawing benefits if you lived in the UK.

If you leave the UK in your 40s, for example, currently you’ll be able to claim your pension from age 55, depending on when you joined the scheme possibly even earlier, just like your former colleagues still living in this country. However, it’s worth pointing out that the minimum pension age is increasing in the UK to age 57 from 6th April 2028 and the state pension age which affects when you can take your 2015 scheme benefits is also increasing and will be 68 for anyone born after 6th April 1978. When you do claim your pension though the NHS Pension Scheme will pay the money into a bank account of your choice, including an account in your home country if that’s what you want.

Extra flexibility
One potentially valuable feature of the NHS Pension Scheme is the opportunity to buy “additional pension” – effectively to pay more into the scheme in return for additional pension rights. This can be particularly useful for IDGs, who may join the scheme later than their UK colleagues and therefore have less time to build up their savings.

If you’re interested in this option, there is an online calculator to calculate the costs involved and the benefits provided. These will depend on factors such as how much extra pension you want to buy and whether you want to include additional benefits for dependants. You may need to take professional advice on the tax implications of this option.

Finally, some IDGs are keen to transfer their NHS pension savings to a pension scheme in another country when they leave the UK, rather than waiting until retirement and claiming benefits paid from a distance. This is allowed as long as HM Revenue & Customs agrees the overseas scheme is a “qualifying recognised overseas pension scheme” – or a QROPS for short.

Just be a little wary with these transfers. Moving money to a QROPS can be a complicated process with unexpected implications. Talk to an independent financial adviser with expertise in this area.

Financial Conduct Authority does not regulate tax planning and tax legislation is subject to change.

This does not constitute individual financial advice.

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

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