A few weeks ago I did a video explaining how the NHS pension works and this is probably by far my best received video so I want to say a thank you to all those that have commented and given me feedback. Now I did get asked one question which I never actually addressed in my original video and that was how does making extra voluntary contributions to your NHS pension work? Extra contributions work very different compared to most other pension schemes as this is a final salary or a defined benefit scheme with the NHS so let's understand how this works so without further ado I'm Kuzan from Financial Madness helping you be better with your money. There are actually a number of ways that you can make extra contributions to your pension scheme. Now if you're a call for my last video there are currently three different types of the NHS currently running at this point in time you've got the 1995, 2008 and 2015 scheme. Now not all of these ways will be applicable to each of these schemes but I'll put a nifty little checkbox down at the bottom so you can stay on track. Now the first one is something called additional pension. Now this is applicable across all three schemes and this is a great way to increase your actual final salary that you get from your main NHS pension. The way this works is that your extra contributions can buy these things called units and each unit that you get will add £250 to your final pension salary. So for example if your final salary will set to pay you out £15,000 per year till the day you die if you contributed extra and purchased one of these units this will increase your salary to £15,250 per year. If you remember from my previous video your final salary is adjusted year on year to account for inflation and this adjustment will also be applicable to any add-on units that you buy. The minimum you can add on is £250 or one unit and the maximum amount does differ between the different schemes. So for the 1995 and 2008 scheme the maximum is £5,000 and if you're on the 2015 scheme the maximum is £6,500. Now the cost of each unit really depends on a whole bunch of variables from things like your data birth to how many units you actually want to purchase. So I'm not going to go through that now but I'll put a link in the description box now below from a calculator provided by the NHS on how much extra units will cost you. Now you can make this extra cost in a lump sum payment or you can spread it over monthly payments if you choose which will be deducted from your pay. The repayment plan can range from one year all the way up to 20 years. You also have the option to buy units that will also increase your dependent benefits as well. If you recall one of the great things about the NHS pension is that in the event of your passing the pension still pays out to your spouse or partner although at a reduced rate. Buying this add-on will add £93.75 per year to your spouse and partner if you have any dependent children this will be £187.50 per year. You still get amazing tax relief when you make additional contributions and this is likely going to be at the same rate of tax relief when you contribute normally. And lastly you claim these add-on units when you reach your normal pension age which if you are on the 1995 scheme this is age 60, 2008 this is 65 and for those that are on the 2015 scheme this is following the state pension age which is currently 66 to 68 depending on where you're born. And obviously there is a chance that the state pension age will rise in the future. So the next way is something called Money Purchase Additional Voluntary Contributions. Now in the documentation that I've seen this is usually referred to as MPABC or ABC. Again this is available for all three schemes and the way this works is that anytime that you make additional contributions the money that you're contributing is put into a separate additional pension pot. The money that you put into this pension pot will then be invested in the market and will act as a supplement to your normal NHS pension when you hit your normal pension age. I want to highlight that this additional pension pot in terms of setup is very different to your main NHS pension. Now the main one does act as a defined benefit scheme whereas the additional one acts more like a private pension. So any money that you contribute will then be invested in the market with the hopes that it makes a great to return in the future. Obviously this isn't guaranteed and the payout that you get from this is determined by how much money is in this pot. Your contributions can be made in lump sum payments or regular monthly payments and you have the choice of two providers that are currently running the NHS MPABC scheme and this is standard life and potential. Now so far it seems like there isn't much difference than if you contributed through this way or if you just went off and contributed to your own private pension pot but there is some difference in the benefits and most of it is down to costs. The NHS have negotiated special terms with standard life and potential so that the costs are a bit more effective than if you went your own private way. There are also some additional benefits between these two providers so I'll put links in the description box down below if you require further reading. By the way if you aren't enjoying this video please be sure to like, comment and subscribe with notification bell on. I release a video every single talk talking about all things personal finance with the ultimate aim of helping you be better with your money. Now the third way is something called early retirement reduction buyout or urbo for short. Love that name. Now this is only applicable for those that are under the 2015 scheme and if you remember you can only access your NHS pension once you hit the normal state pension age and under the 2015 scheme this is following the state pension so this is going to be between 66 and 68 currently with a chance of it actually increasing if the state pension actually increases as well. Contributing extra through this scheme will allow you to access your money earlier although not earlier than 65 and that you can access this money earlier without obtaining any losses. Under normal circumstances if you wanted to access your pension before your normal pension age the final salary that you will get will be at a reduced rate and this is to compensate for the longer term of payout. Now making additional contributions through this scheme will mitigate that reduction. So for example minor more pension age would be 68 I can then buy an urbo agreement of three years which will allow me to access my pension at the age of 65 without any reduced benefits. Now the fourth way is something called half cost adidiers and this is only applicable for those that are on the 1995 scheme. So a bit of a history lesson for you prior to the 2008 scheme being introduced members were allowed to buy adidiers if they were not able to achieve the maximum membership scheme which was 40 years. Now making additional contributions through this scheme will allow some members if they are eligible to buy adidiers at half the cost. Purchasing these adidiers will increase your final salary which you will get paid out to once you hit retirement. Now lastly this is a very specific one and this is called a bigger lump sum purchases and this is only applicable for those that got their pension before the 25th of March 1972. So it's only applicable for the 1995 scheme but not all of them so it's very very specific. Under normal circumstances you can exchange part of your NHS pension in favor of getting a lump sum amount in cash. Now the maximum limit that you can get is typically 25% of the value of your pension benefits. Some members may have a reduced lump sum limit which is why I said the date is very very important and that is the 25th of March 1972. So any extra contributions that you make through this scheme can buy you an un-reduced lump sum limit. That's some out for. So those are the key ways that you can make extra contributions to your NHS pension. Please do be wary of your pension contribution allowances. Everyone does have an annual allowance of 40,000 pounds that they can contribute to their pension per tax year and they have a lifetime allowance that currently stands at £1,073,100. I do sneak more on this from my video from last week so do check that out if you want to learn more but as it just any contributions that you do make above these allowances will result in a very very hefty tax bill. So please do be very wary on how much extra you are contributing as I demonstrated last week. So passing the lifetime allowance isn't as unachievable as one might think. Cool so that is it. Let me know in the comment section down below if you do have any questions. If some of that didn't make sense I would suggest you checking out my earlier video on NHS pensions explained. That might clear up some of your questions. Otherwise feel free to pop a comment down below and I will be sure to get back to you. And as always if you did find this video really useful I would appreciate if you smash that like button that does wonders for the YouTube algorithm and the growth of my very small YouTube channel and as always I release a video every single week so if you want to keep up to date with those hit the subscribe button as well. See you later. Bye.