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‘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)

  • The NHS Superannuation scheme looks to be unsustainable in the long term, despite the government utilising higher earners to pay for the pensions of lower earners within the scheme (basically a wealth tax within the scheme). At some stage there will be a major crunch because benefits will have to be reduced. My best guess is there will be some sort of cap on the amount the scheme will pay out (either as an actual top limit e.g. £30k, or as a severe taper off at the top end, possibly with punitive taxation). The warning sign that this is likely to happen will be an attempt to stop people leaving the scheme. I've left the scheme because I don't trust any government over a timescale of 30 years, and would rahter have some flexibility in financial planning now.

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  • I left this Ponzi scheme at the age of 41 and never looked back. More money in my pocket and proper investments that I can enjoy at any time and my children will inherit. Fixed protection at 1.5 million and no annual allowance charge. You can stick your ancillary benefits.

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  • This article is an unhelpful vague advertorial.

    GP's are leaving because of the triple whammy of AA tax on the way in, LTA on crystalisation and high rate tax on drawn pension.

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