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How much do added pension years cost?

Q. I am a 36-year-old full-time GP principal and want to look at added years as a way of topping up my pension. I want to retire by 60. I have two children and will need to finance their education for the next 15-20 years. My spouse also works full-time. How much would added years cost me?

A. Purchasing NHS pension scheme (NHSPS) added years is probably the 'best buy' option for you. Each added year, or part year, brings with it all the benefits of the main scheme. This includes dependants and ill-health retirement benefits, index-linked pension and extra lump sum. It is unlikely that the added years scheme will continue in its present form once the review into a new NHSPS is completed, so it would be a mistake to wait.

As you will have more than 20 years' membership of the scheme by age 60 you can only buy added years to bring your membership to a maximum 40 years by age 60. Assuming you joined the NHSPS at qualification at age 24 you can buy approximately four added years.

The exact amount will depend on your birthday and you can buy in fractions of years and even days.

The amount you pay is based on your age next birthday. Each whole added year will cost you 0.89 per cent of your superannuable income each year. If you buy the maximum four added years this would be 3.56 per cent. You will be entitled to full tax relief on payments. Therefore, if your current superannuable income is £95,000 you will pay £3,382 per annum gross or £,2029 net of 40 per cent tax relief. This would buy you extra pension of £5,320 and an extra lump sum of £15,960, both at today's prices. All of these figures will rise as your superannuable income rises.

The commitments to you children's education should be funded by regular savings. The earlier you and your spouse do this the better.

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