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NHS Pension Drawdown

Can I drawdown my NHS pension? Find out all the advantages and disadvantages here.

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By Pete Mugleston   Mortgage Advisor

Last updated: 18th March 2019 *

NHS pension drawdown – are you eligible and what are the risks?

One of the employee benefits of working for the National Health Service (NHS) is your entitlement to join the NHS Pension Scheme. However, along with Local Government Pension Schemes (LGPS) there are restrictions that you should know about when it comes to withdrawing funds, in particular the criteria for making a drawdown.

So, what does NHS pension drawdown involve and are there any associated risks?

We get asked this all the time, fortunately the pension advisors we work with are experts in this area and can offer the right advice.

In this article, we’ll explain:

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Can I drawdown from my NHS pension?

Drawdown was not an original feature of the NHS pension. Drawdown is only available to members of the 2008 NHS Pension Scheme and 2015 CARE facility.

For these members, up to two drawdown withdrawals can be made before they reach retirement (minimum age is 55). This means they can take between 20-80% of their pension, while they continue to work for the NHS.

How does drawdown work for NHS pension holders

If you fit the criteria, it means that when you reach 55, which is the minimum pension age for members, you can start to reduce the hours you work and at the same time, start to withdraw some of the pension you have accrued.

By reducing your hours however, it does mean that any further pension entitlement you accrue will be less. It’s expected that the reduction you take should lead to an overall 10% reduction in your pensionable pay.

How can I apply to drawdown my NHS pension?

This is a straightforward process. You simply need to ask your employer for a retirement request form and they’ll then confirm that you meet the criteria.

The process will include determining your new reduced hours and this is something you’ll need to commit to for at least 12 months.

What are my options for a drawdown pension if I have an NHS pension from section 1995?

Because the NHS pension drawdown is not available to 1995 section members, some have chosen to change their pension to a more recent section to allow them to withdraw funds early, and this could be an option worth considering, depending on your needs and circumstances.

The key difference is that you may need to work for longer. In the 1995 section the normal retirement age is 60, for 2008 it’s 65 and for 2015 it’s the state pension age.

There are some circumstances, however, in which you can ask for drawdown and these include being terminally ill, in which case you’ll be awarded a lump sum for an illness where it’s not possible to determine whether you’ll be able to return to work.

There may also be concessions if you run into financial difficulties or are going through a divorce. You will need to apply to your employer to request drawdown in these circumstances. Make an enquiry and one of the pensions advisors we work with will give you further information about this.

What are the benefits of pension drawdown?

By drawdowning your pension you have more control and flexibility over your investments. You could for example drawdown because you have a specific expense, or you could drawdown to re-invest somewhere else. When you drawdown you don’t need to take a lump sum. You can also arrange for regular withdrawals which will top up your income – the choice is yours.

What are the risks of drawdown?

Like most financial products, pension drawdown comes with a number of potential risks that you should be aware of, so we’ve laid them out in this section…

What are the problems with NHS pension drawdown?

Firstly, if you want to drawdown funds without reducing your hours, then drawdown isn’t possible with an NHS pension.

What are the risks associated with pension drawdown in general?

If you decide to drawdown your pension you first need to decide how much you want to take out.

This requires precision planning because if you withdraw too much it could impact on your future finances, as you may not be left with enough to cover your living expenses when you’re fully retired.

You may even live longer than you estimate and if you run out of your pension early, you could face difficulties in later life.

Secondly, funds that you don’t withdraw will continue to be invested, and if an investment falls you may get back less than you originally invested.

As mentioned earlier, once you’ve taken out your initial 25% tax-free sum, any additional funds you withdraw will be taxed so you should also factor in how much this will cost and whether you can afford these fees.

Remember, if you’re moving your pension to another provider so that you can drawdown, check that you won’t be losing out on other benefits or even be charged exit fees. The advisors we work with can do this on your behalf if you make an enquiry.

What are the alternatives to pension drawdown?

Rather than risk your financial future and the amount of pension you receive when you retire, there are other alternatives you can consider instead of drawdown such as…

  • Taking out a personal or secured loan
  • Changing your mortgage to a lifetime mortgage so that you can claim a lump sum of money from the equity of your home.
  • Other methods of refinancing.

If you’re considering remortgaging or taking out a loan of any kind, the experts we work with can advise what could be the right type for you, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Speak to an expert on NHS pension drawdowns

Before you make a decision it’s important you fully understand the risks and consequences of making changes to your pension plan.

One way is to seek independent advice on pensions by speaking to a Financial Services Advisor who will give you impartial advice.

You can also contact the government’s Pensionwise service for free, impartial advice if you have specific questions about your retirement plans.

Talk to a drawdown pension expert today

If you have questions about drawdown pensions or just want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  We don’t charge a fee and there’s absolutely no obligation or marks on your own credit rating.

Updated: 18th March 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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