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Independents' Day

‘GPs are losing out by leaving NHS Pension Scheme’

Most GPs are not better off leaving the scheme, even if it means they face higher tax charges, writes finance expert Andrea Sproates

andrew sproates

I am concerned that too many doctors are making ill-informed decisions about their pension arrangements and, in particular, are leaving the NHS Pension Scheme because of potential tax charges.

We have noticed a significant increase in the number of doctors deciding to stop contributions into the pension scheme, or even taking the step to retire early, because of tax charge fears if they make excess contributions or if their pension assets become too large.

These concerns have increased significantly since the introduction of the tapered annual allowance in 2016, for those with adjusted income of over £150,000 and a threshold income of over £110,000. The result is that doctors could be facing an annual allowance tax charge on contributions and a lifetime allowance tax charge on benefits.

This is an area about which doctors are understandably worried. Many are talking about this issue amongst themselves, or taking advice from their accountants. However I’ve seen numerous cases where decisions are being based solely on tax issues without considering the doctor’s overall personal and financial circumstances.

If GPs leave they will miss out on valuable pension and ancillary benefits

I’ve also seen cases where there is a lack of understanding of how the tapered annual allowance is calculated in relation to the NHS Pension Scheme. A recent example I was involved with would have cost the doctor tens of thousands of pounds if we hadn’t become involved.

In some circumstances it may be the right decision for a doctor to leave the NHS Pension Scheme. However, in most cases it isn’t. While they could face additional tax charges by staying in the scheme, if they leave they will miss out on valuable pension and ancillary benefits, which could be much higher than the possible tax charges.

Andrea Sproates is head of Chase de Vere Medical


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Readers' comments (13)

  • I had to get out as the tax charges were financially crippling. Probably cost me a lot of money in the future--but I need the money now.

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  • AlanAlmond

    I left the NHS pension scheme because it’s a ball and chain, simple as that. If you are asking people to make smart decisions about their pension you’ve got to ask is it really so smart to continue being a GP in the first place. Being in the NHS pension scheme demonstrates a strong commitment to continue working in the NHS. It may be smart to be in the NHS pension over the long run but it certainly isn’t smart to be in the NHS over the long run. If you are using it as the main reason to stay..which I suspect many are, I think that’s a little sad.

    If your not in it , the government can’t use it as a bargaining chip to force you to stay, and your free to walk whenever the random hand of fate and luck permits you to.

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  • AlanAlmond

    ...also you’ve got to ask yourself, do you really trust the government with your pension? They appear to believe they can change the terms and the contibution rates at their whim. The country is completly skint, do you really believe the NHS pension is safe from the sticky hands of every successive government from here to your retirement? A few months of adverse headlines in their chosen papers and TV channels is all it would take for and the entire country to be shouting for ‘their money’ to be returned, don’t believe it? How many young workers will there be for every retired pensioner when you hang up your stethoscope? Significantly fewer than there are today. They won’t be happy slogging their guts to pay tax to pay your cushy pension. Make your own arrangements or prepare to be unpleasantly surprised.

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  • Hit 1.27 (fixed protection) at 50 and got out.
    Not a single annual allowance charge.
    Will defer it til 57 if I last.
    How the hell can we entrust a motley crew of corrupt liars to look after our hard earned money?
    Their latest self-serving venture is to make a mint out of dumb health apps and forcing us to use them.
    Some financial advisers live in cloud cuckoo land.

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  • The Nhs pension scheme is a scam. It’s a black hole and a certain path to financial ruin. So much happier to have made alternative investments that are much safer and much more profitable in the long run

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  • The NHS pension scheme is not worth it anymore,you cant sell it as a reason to be a GP especially not the modern versions, contributing too much,paying too much tax ,not flexible and only being able to get at your mony when you are nearly dead.Most GP would have to live into their late 80's mid 90's to even break even so not really a very good deal.The life time allowance and yearly allowance are punative in the extreme.I wonder how they are going to fund this unfunded pension when everyone wises up to it???

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  • David Banner

    This article has no real meat in it. Just how is a GP who has hit his/her Lifetime Allowance and has been kicked off the 1995 scheme better off to continue the massively increased contributions with potentially massive Annual Allowance bills?
    And as AlanAlmond points out so well above, what is to stop HMG making yet more punitive changes to what is perceived by the public to be a soft target? (Tax the lump sum? Up the contributions and lower Lifetime Allowance again?)

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  • Expect a lot more of these pension puff pieces, as Treasury have finally realised that now they have forced out all the high contributors there’s no one left to fund the pensions of all the retired nurses, porters and nhs managers.

    Had to get out at 49 as my added years ‘best deal you will ever get’ bma told me, took me into the toxic tax zone. £1000 a month better off, cash in my pocket, not ‘jam tomorrow’

    See my ex Gp partner who retired nearly 20 years ago drawing a 50% bigger pension at 80 than I can accumulate. Got fed up with paying for his cruises for him!

    I don’t expect for a minute that this government will return the money I’ve paid in over 30 years. Lump sum will be the first to go. What a mug I’ve been, should have put it all in property.

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  • Er..self promotion, should classify this as an advert... probably will offer you a free review if you call... then the fees will appear. Usual use of fear / FOMO from 'financial gurus' to make people call. Most Drs don't need a broker, and can work out whats best for them. Use a low cost platform, e.g. Interactive investor or vanguard for low cost passives.....VCTs an option if over the pension limit. Thanks to the high returns from Fund smith and Scottish mortgage meant at 44 yrs of age I couldn't put anything else into my pension.... and I have control over it. Working outside the UK means you can utilise pension provision in other countries without affecting Uk lifetime allowance... so you can have over $1million pension pot if you're willing to travel. Fill your ISA boots every year..... no tax relief, but you don't pay tax on any income from this.....if you have kids if you do their junior Pensions and JISAs by the time they come to retirement age 50 years own the line they'll be sorted. On their JSIPPs for each £4 you put in , they'll get an extra £1 from HMG, so £3600 costs you £2880...£720 tax back per child..... Not sure about the kids funds? Try Vanguard 100% life equity, Baillie Giifford Managed, Unicorn Mastertrust and add a small cap... e.g. Baillie Gifford Global discovery. Spouse looking after the kids? Have the child benefit paid into their account, even if you have to pay it back they get 'contributions' towards their National insurance/ can also pay £2880 into their pension and get about £720 back....

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  • A bird in hand is worth two in the bushes!!

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