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GPs leaving NHS pensions scheme ahead of April changes

Exclusive Accountants are warning GPs are increasingly planning to leave the NHS pension scheme from April against their advice, due to new rules meaning many will have to work until 67 or 68 years of age or risk losing benefits.

They have told Pulse that a number of GPs have begun leaving the scheme as a result of the introduction of a new scheme that will mean all GPs who are not close to retirement age will have to work longer in order to receive their full pension entitlements.

This comes as yesterday’s Budget announced that the lifetime allowance for tax free pensions contributions is to be lowered again to £1m, which will bring more GPs paying tax on contributions.

GPs have told Pulse they are intending to opt out of the pensions schemes before 1 April because of fears over what will happen to their pensions if they have to take early retirement due to burnout, while a Pulse survey of 564 GPs last November revealed that 20% of GPs intend to leave the plan following increases to contributions and incremental reductions to pensions tax relief.

But accountants and the BMA have warned that leaving the scheme was not the best option for the vast majority of GPs.

The April change will affect all GPs who were not within ten years of their normal retirement age on 1 April 2012.

Those who were within ten years of retirement age have full ‘protection’ from the new, less generous 2015 scheme and those who were within 13.5 years have ‘tapered protection’, meaning they will enter the scheme with a delay which is dependent on their age.

This will only affect contributions made after 1 April, however.

The pension scheme went through overhauls in 1995 and 2008 respectively, with the normal pension age under the 1995 scheme set at 60 and increased to 65 under the 2008 scheme, but this year’s changes will put the normal pension age in line with state pension age.

Dr Benjamin Williams, a 43-year-old GP partner in Swinton, said he would leave the scheme because he would have to work until 67 to accrue all the benefits.

He said: ‘I have weighed up all the pros and cons regarding the 2015 pension scheme and have decided to pull out of the new pension scheme from 1st April. One of my colleagues has also done the same.

‘With the current unsustainable workload in general practice I am absolutely sure that working until 67 is not an option for me and if I take my 2015 scheme pension at 60 I will lose roughly 35% of the value of the 2015 pension.’

Accountants have said there are an increasing number of GPs leaving the scheme.

Bob Senior, chair of the Association of Independent Specialist Medical Accountants, said that about ‘25% or 30%’ of GPs aged between 50 and 53 are looking at leaving the pension scheme as ‘they just don’t think the new arrangements represent good value.’

He added: ‘A lot of GPs have always thought they would retire at 60, and very few have the appetite to go on to 67… I’ve come across one or two young GPs who want to leave the scheme. They don’t seem to trust politicians because they have seen them play around with pension schemes in the past and they think they will do the same again to make them even less attractive in the future.’

Luke Bennett, a medical accountant and partner at Francis Clark, estimated from his encounters with GPs that about a quarter of those currently aged between 47 and 50 want to opt out of the new scheme.

However, they have warned that GPs should not leave the scheme.

Keith Taylor, head of medical services at BW Medical Accountants, said he has come across GPs of varying ages who do not want to be part of the new pension scheme. ‘I spoke to a junior partner recently and he thinks he can get a better return elsewhere.

‘But actually the pension scheme for GPs, even after the changes, still has a much better return than you would get virtually anywhere else except in very high risk equity punts. People in the private sector would give body parts for a pension scheme like this. I think there has been scaremongering about the changes to the scheme. For nearly everybody, it’s worth staying in.’ 

Mr Bennett said: ‘Even with the changes the 2015 scheme is a valuable benefit and one which I would be happy to join if it were open to accountants.’

The BMA, which unsuccessfully fought the pension changes culminating in doctors walking out on the ‘day of action’ in 2012, also warned GPs considering a full exit to consider the impact on benefits like the death in service gratuity (two times actual annual pay) and the right to future ill-health retirement.

Its guidance said: ‘[S]ome doctors are questioning whether they should remain in the scheme or opt out [but] it is extremely important to think about the impact this will have on the valuable associated benefits provided… Consequently, any decision to opt-out of future service should not be taken lightly. It is unlikely to be in the best interests of the vast majority of scheme members to make the decision to opt out.’

 

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Readers' comments (40)

  • currently 40 years old - a little younger than Dr Ben williams. If i was him I would hold tight with scheme - remember for him at 43 - he should have a least 15-20 years on old scheme (to pay out at 60 or 65 depending on whether 1995/1998 scheme). If we assume given his age - that he is in 1995 scheme - he would have perhaps another 17 years to accrue in new 2015 scheme if he was to stop at 60. the 'overall ' reduction in total money - would therfore not be 35 % - it would be less that half of this - if he were to go at 60 - when both pots were taken into account.
    The new accrual rate of 1/56 compares favourable to the 1995 scheme of 1/80th.
    Hold tight - it is our only way out !!!!!!!!!!!!!!!!

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  • The budget has also been a pensions disaster - tax now on any gain above £40k per year and lowering of LTA to 1m.

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  • Concern is that this is a ponzi scheme. The money isn't put aside. Wait for the Daily Mail to spin this one when the tax payer has to bail out the NHS pension scheme.

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  • Most of the medical accountants do not give a true picture and facts to newly qualified GPs.

    Please speak to a qualified independent financial advisor- there are plenty of other options available-

    Remember your pensions would constantly be raided by generations of politicians to come-

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  • Advising to " hold tight " would be sensible if the depredations of the government didn't go any further . Of course this is only the beginning and because there has been no protest it will just get worse . Blood in the water attracts more sharks . To make it affordable for the private sector to employ doctors then the NHS pension scheme must be terminated .

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  • A good option seems to be to dip in and out. This reduces the size of the pot but frees up cash at times of need (ie paying childcare) and allows for diversification of your assets. As above, this needs careful thought and professional advice because it has tax implications as well as altering the return on the investment; timing is also important.

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  • Nobody to do OOH over Easter - just before the election ; that should warn them !

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  • Agree with 10.49 things will just get worse if we allow it.

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  • Bob Hodges

    'Holding tight' is essentially a bet that the next lot of thieving politicians and gong-hunting civil servants won't change the rules AGAIN and that those changes won't necessarily be contrary to your interests (which are diametrically opposed to their interests which include re-election, a new kitchen every couple of years, a much better pension scheme than yours etc etc).

    Good luck with that bet.

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  • Not a good deal with the life time allowance+ the yearly limit, and the punitive tax levels when you take your pension.The deal is not a good deal.It alright for accountants doing regular hours,no ooh+having control.Where us poor sods in GP land are currentley doing a job where the life is sucked out of you every day.Better to do a SIPP, diverisfy your assets where they cant get hold of them,and provide your own insurance.At least hat way your in control not they where they can change the rules one sidedley at a whim.The scheme is a ponzi scheme, if it become not self sustaining,the government have to pay out.Until recently it was in surplus with the government taking excess into treasury coffers.Are they scared or do they care.As they say on Dragons Den im afraid Im out and they can shove it.

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  • If you are over 55 bail out now . If not ,too bad- you will crash and burn . Protest with all your might do not go quietly .

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  • Bob Hodges is spot on when describes politicians as thieves . Taking something to pay for their own 11% pay rise . At what point will our profession say " hands off ,you robbing bastards " ? If we wait much longer there will be nothing left to defend .

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  • Bob Hodges

    Locally, we are considering lobbying the BMA to set up an alternative pension scheme.

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  • The decision to come out depends upon indviduals plans for retirment. I am aware of many young GP's seriously considering coming out of the NHS pension.

    Im a 32 year old GP partner and with the new changes in reduction of LTA and the potential for further annual tax charges I am considering my options carefully. I dare to say it but by the time I get to retirement the powers to be will have dropped the tax free lump sum.

    For arguements sake, from my understanding, if I was to retire at 58, I would be penalised approx 50% (5% for each year) of my pension pot. This would equate to esentially getting out a similaramount to what ive put in, and would have to live until 78 to even break even (at which point I will probably be long gone)

    I would rather choose my own investments and have the power to draw these down when I feel the time is right for me. Giving me flexibility and also what i believe may well be more fruitful investment (athough riskier) than the current NHS pension.

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  • I would be careful with SIPPS and Venture capital investments. While you can have better gains, you might as well be playing russian roulette.
    Withdrawing sums may also not be a good idea because you lose your benefits. You may want to start another policy in a different employment and keep this pot suspended with the NHSP scheme so it can
    1. Be indexed upwards annually as per the CPI/RPI - I think there was a change there- for the worst of course.
    2. In case of a mishap, your family is protected
    3. You don't have to pay a tax on a quick unwanted withdrawal this early when you have other sources of income.
    This is not professional advise but a thought as have been considering my options coming to 55 next year:)

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  • I am the Dr Benjamin Williams mentioned in the article - as a GP partner from April 2015 I am looking forward to significantly higher monthly drawings after pulling out of the 2015 pension scheme. I will invest in ISAs, pay off my mortgage much quicker and will ultimately have more control over my money. I know I will pay a lot more tax on my income due to the loss of tax relief but at least I will have some money to spend on holidays and a few luxuries at last. I have about 20 years membership of the 1995 scheme under my belt and as of yesterday I am pretty close to the £1m lifetime allowance - this is easy to work out - get a pensions statement off NHS pensions - 20 times the annual pension plus the lump sum gives you the pension value - if you are anywhere near the new £1m lifetime limit then you need to seriously consider pulling out in my opinion

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  • the Profession, if there still is one, should take industrial action on the issue of pension changes, annual allowance, and LTA.

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  • A simple refusal to do any OOH work would be effective . It doesn't even need everyone to be involved . A 33% reduction would swamp A+E which is all the politicians care about .

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  • even my financial advisor who was a great fan of the NHS pension told me its a no-brainer to get out of the scheme - retiring at 57 I would have to live to 78 just to get back what I would pay in over the next 7 years - oh and pay tax on my contributions and my pension when I get it !! Use the money to pay off mortgage and at least have a tangible asset when you retire.

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  • Better to plan your sessions to keep your income just below 100000.
    Drop your sessions accordingly full timers..
    It is your hard earned money and try and stop others from stealing it.
    Use an independent financial advisor

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  • ...and sorry to say, the profession has been divided, so senior GPs, please do NOT mislead juniors with your unprofessional advice..thanks

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  • As a partner in my mid 40s i have thought about opting out of the scheme for a good while and there are lots of issues to consider. What is certain is that all recent changes in lifetime and annual allowance have the result of massively increasing the tax burden for many GPs. Going over the lifetime allowance in my opinion is a NoNo and nobody should even consider going this route. Avoidin annual allowance excess by maybe dipping in and out whilst this is an option might be an option even if it comes at the cost of less pension pot growth.

    One has to consider that many of us will pay 30-40k into our pension pots annually and even if we would get taxed at 40% this would still leave a reasonalbe sum when you need it most - now.
    Once we start tax [ via the annual allowance ] on top of the contributions the new scheme does look really poor as we will have to pay tax on our pensions once we collect them. If you do the sums you would have to live a VERY longlife to get back what you've paid in from now till retirement [ 67 probably 68] and chances are it'll only pay for your care home.

    One big difference that in my opinion the financial advisers do not grasp is the fact that there is a massive difference for partners and salaried GPs as for a salaried Gp they would still forego 14%+ of their potential pay [ employers contribution] which makes opting out of the scheme much less attractive than for partners.
    Truth is - they have stuffed us again and they will continue to stuff us.
    Do not trust the politicians with your pensions.
    It's good to have some pensions back up but i don't think it is wise to lay all your eggs in one basket like we could do in the past.
    If I was a GP registrar I'd seriously question if it's worth it at all .

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  • I am 43. Left the scheme 3 years ago. I will get an estimated £27K per annum at 60 based on my contribution up to the point I left. I now pay 21% of my income into a SIPP. Aiming for a modest 5% growth - investing mainly in corporate bonds and blue chip high dividend paying equities. At retirement will enter drawdown withdrawing just the interest less inflation so the pot does not reduce in size (not withstanding fluctuations in the stock market). I will have about £43K per annum to live on. More than enough for me. The pot will exist in perpetuity - for my children a nice inheritance, something the nhs pension will not provide. It is boring - but my advice is for everyone to sit down with a spread sheet and an open mind. Before you do this though - ask yourself the question- how much will I NEED in retirement.

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  • The comment that under pins the direction of travel points out that privatisation of salaried GPs cannot be profitable until the pension subsidy is abolished.The 1995 scheme will not appear anywhere again unless you are CEO of a major bank and offshore everything.
    There could be a UK based independent GP mutual pension company set up ,not for profit ,with an ethical board.Some ideas can be taken from the professional indemnity insurers.There are a few financially literate Drs who along with an elected board of chartered accountants could run this .Diverse low to high risk and efficient tax plannng will ensure a legacy "pot" can survive the lifetime of the contributor. Working beyond 60 is unrealistic for most. Part time work from 50-55 has it's efficiencies with marginal tax issues.Most will find the funds useful well before age 78..truly, you only live once and most of the quality is before 78!

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  • The NHS Pensions Scheme is still a great deal.

    It's clearly not as good as it was and tax charges might appear horrendous but you couldn't replicate the same benefits through any private scheme.

    I have undertaken A LOT of GP pension calculations and in my opinion you should be more concerned with annual allowance charges than LTI charges.

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  • To those of you asking GP’s to cancel OOH over Easter forget about it. No one is going to lose thousands of pounds worth of income just to make a point to a politician. A doctor can earn over Easter what a partnership can in a month.

    Besides, many newly qualified doctors are working through agencies or companies from day one and have no intention of ever joining the NHS pension scheme. They have no interest in joining partnerships and there are plenty of other investment opportunities than the NHS pension.

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  • I have just filled out my opt out form. I am 32 and plan to leave at 55. under the new section I would lose 70% of my pension so for me it is a no-brainer! I have also recently given up my partnership to battle burnout. What did work for me as a salaried Dr was negotiating with my employer that if I pulled out of the scheme they would add the employers contributions into my gross pay. My employer was happy with this as I was not costing him more to employ. Of course I do have to pay tax on this and I do not get all of it as the employer NI increases by ~3% when i leave the scheme but all in all I am in control of my money and can choose where to invest it.

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  • It's a matter of trust. If you stay as a GP & stay in the NHSPS then you are trusting all your current & future income to the government. I'm 41, have 17yrs in 1995 scheme and am paying about 31% of my gross income to the NHSPS. Leaving now, I can get flexibility. My 1995 contributions are protected. I can pay off debt, pay off mortgage, invest in Sipps, ISA's, whatever. Basically I would then have a secondary income in the future which isn't directly under the influence of a political whim.

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  • Does anyone know for sure if 1995 contributions will be increased by the 1.5% dynamisation + CPI if I am leaving the scheme or will they just remain what they are now and so effectively decrease in value year on year due to inflation

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  • Very soon the government (does not matter which party) will announce the birth of the "New NHS". Tax changes like further reduction of LTA and the merger of the NHS pension with the state pension scheme will be hailed as cost effective measures serving the interest of the public .It will be interesting to see what work force will be recruited. If everything goes according to plan then general practice will also be a thing of the past one day...

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  • Medical accountants: This has to be the best spin ever. Do we never realise? THERE IS NO MONEY IN THE COUNTRY. The Govt is borrowing everyday just to pay the interest. The current lot (workers of which there is a dwindling lot) are funding today's retirees. The money has not been set aside in the past and they cannot afford to set aside given austerity. So when I retire (If they let me, that is), who will fund my pot? Er, fairy dust? At 38, I am out. So is one of my other partner. I would rather have the money post tax when my knees, mind and back are intact rather than a princely pension later (albeit heavily taxed). There are plenty of safe investment options that give a decent return (I know because I have invested). As said earlier, speak to an IFA. The writing is on the wall. Pensions for everyone, work harder, longer, pay more tax and pension etc etc --> Sorry, No brainer.

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  • I'm taking a leaf out of the government's book and retraining as a pick - pocket.

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  • Retrain as a banker- then you can rob everyone " legally ".

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  • Does anyone know a good independent financial adviser who does not recommend every GP to stay in the pension scheme by default? I mean someone who is truly independent

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  • My IFA still seems to think that the pension scheme is the best thing since sliced bread.

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  • Almost all IFAs think it is a great deal compared to private pensions, so they recommend staying in the scheme.

    It is a good deal still if the government doesn't rob the scheme continuously for the next 30 years until younger GPs retire, which we know they will continue to do, and if you end up living to 80+.

    I paid in as a GP 14% and rising, plus employers contributions now lost in global sums meaning 30% in NI contributions, with tax free contributions gone for 1st 10%, and tax on contributions and now lifetime allowances.

    Then work us into the ground so we can never collect our pensions - fiction would never be this bad.

    If you are on the lower end of life expectancy and continue to pay in until the new retirement age 68+ and rising, you will never get your payments back let alone benefit from the scheme.

    Get out while you can and spend and enjoy, or just work less now.

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  • The only guarantee in life is death and that the ruling elite will continue to steal from those with less power.

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  • will mps be worse off with the changes? of course not, they have just increased the size of their troughs, mps lke the ex gp turned mp is a traitor

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  • OK I get that the lifetime allowance has now reduced (again) and undoubtedly more cuts to lifetime, annual allowance and possibly even changes to valuation factor of 20:1 are on the way no matter which party wins election.
    Trouble is the NHS pension scheme was never designed with these ceilings in mind and it doesn't really suit them.
    I think the biggest barrier to staying in scheme is the - 'all or nothing' approach that must be taken. I.e.- either we stay in scheme and pay a fixed non negotiable % and possibly break lifetime and annual allowance with the huge penalties... Or we leave - losing survivor and all other insurance benefits etc.
    I do notice the local government pension scheme (LGPS) have a 50:50 option - ie pay 50% of contributions for 50% of benefits. Why isn't this option open to us? I am certain that if some of these doctors suggesting leaving the scheme were given a 50:50 option -they would reconsider.
    Surely the overall NHS Scheme would benefit from that sort of stability.

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  • The devil is in the detail. New April 2015 pension scheme points to State pensionable age - which may well be 70-75 for GP's who are in their 40's.

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