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Independents' Day

Should I leave the NHS pension scheme?

Accountant Luke Bennett explains how tax changes coming into force in April will impact on GP pensions 

I will start this column with the usual caveat: the decision to opt out of the NHS pension scheme should not be taken without specialist independent financial advice. For those who are starting off, joining the NHS pension scheme will still be worthwhile in the majority of cases.

Having said that, when earnings increase, GPs may have to review their position, as the annual allowance – the increase in value of a GP’s pension each year before more income tax is charged – will be lowered for the highest earners from April.

Previously, the threshold was £40,000 for everyone. Now, any GP with taxable income over £110,000 and combined income plus growth in pension over £150,000 will have a reduced annual allowance, on a sliding scale down to £10,000 for highest earners.

What can I do?

If you think you’re in danger of exceeding your annual allowance, you can request a statement from NHS pensions to find out how much your pension is increasing year by year. They will automatically issue a statement if you exceed the annual allowance.

However, these statements can be issued only after the end of the tax year, by which time it will be too late to consider action.

If you are within 10 years of retirement, you could take 24-hour retirement, retiring from all NHS posts, drawing the pension, and then restarting work. You could also stop contributions without drawing the pension until later, but be aware of the loss of life cover and ill health benefits. It is also possible to opt in and out of the scheme each year so you only pay into your pension for part of the year – but again you lose benefits while opting out.

If the annual allowance for tax due is over £2,000, it can be paid through the NHS pension scheme, although it will come out of the pension you receive later.

Another tax hit

Meanwhile, the lifetime allowance – the total you can build up in your pension pot without paying tax – will reduce from £1.25m to £1m. If your funds are already over the £1m point you can apply for your lifetime allowance to be set at the value of your fund at 5 April 2016, up to a maximum of £1.25m. I would advise the same as above.

Luke Bennett is a specialist medical accountant at Francis Clark LLP


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Readers' comments (14)

  • Interesting, This thread has been up 2 days and yet no comments. I think this because we are so pass the question about leaving the NHS pension, many of us are contemplating the question "should I leave the NHS?"

    DGPP (3yrs)

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  • It's an absolute certainty - regardless of the nebulous pros and cons of being in the NHS pension at any given time for any given individual - that over the coming years the government will be using your NHS pension as a ball and chain to get you to endure no end of crap. If you ain't in can't be used as a stick to beat you. Take control of your own pension arrangements and be free to leave the NHS when ever you feel the inclination. Stay in it ...and Hunt and the next one after him will continue to behave like they own you.

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  • The NHS pension scheme is irrelevant in the grand scheme of things, especially if you're young under 35....

    Not only should you leave this satanic ponzi scheme that will require you to probably work until you die you really ought to


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  • Emotions aside, leaving the scheme is not the best of options as you will still not find an equivalent scheme. Unless, you buy a property to which you contribute your monthly equivalent of contributions and at the end have something that may have gained in value. You still have to top this up with income loss/death cover which is available as part of your NHS benefits. And you won't get tax relief on your contributions.
    The ideal way would be to earn as much as entitles you to tax relief and do the rest as a locum- limited company- paying only 20% tax.
    Just a thought, I'm not an accountant.

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  • all doctors should leave the scheme,i suspended membership 4 years ago and took my pension last month I am one of the fortunate older generation but my advice to younger colleagues is that this scheme does not represent value for money once your lifetime allowance is exceeded as the tax penalties are huge.A £1m pot represents a pension of £43,478 but this is when you take it, which in the 2008 scheme is at 65,your pension grows by inflation plus 1.5% per year which is great but assume 2% inflation that is compound interest.This means if you are 45 and your pension is £22,000 you will exceed this amount,so request a pension statement once you hit £22,000 defer your membership.The other big disadvantage is you cannot vary you contributions unlike private schemes
    hope this helps

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  • I mostly do OOH work. They pay same with pension or without. If I don't pension my work, I lose all the employer contribution, with no subsequent increase in rates of pay, so it's better to stay in it (until I emigrate next year).

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  • To anon 9:19 pm
    income via limited company - less tax until march 2016 (bit more tax after that)- not pensionable.
    direct income - more tax - pensionable.
    If you are getting paid from ooh as PAYE and paying high tax - might as well get the pension.

    Having said that if you are emigrating, you could do better by getting the income in limited company and closing the company while leaving the company take the money out as CGT or Entrepreneur's tax.

    As for me, I am immigrating. Even if I have stayed, I won't pay in to pension. With my family history of diabetes, my long days of working, my stress levels, i won't live to 68 or 70 or 73 whatever the age of pension becomes if and when i do get to retire. Coz any anon compliant, however silly could potentially lead to FTP and could potentially lead me to be removed from my profession.

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  • to the last 2 posters

    well done for ditching the country comrades!!!!

    @1:40 am I suspect your life expectancy just increased exponentially !!

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  • Leaving the scheme now. Did not qualify for tapering relief in 1995 scheme as too young.In my forties. No way am I working till 67. Job in its current format too onerous. Need alternative investment as pension scheme no longer an attractive option.

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  • On the subject of NHS pension, has any GP out there who are members of BMA taken advice on Lifetime allowance protection from Chase de Vere? If any of you considering it I advise a word of caution, the advisor gave me the wrong advice in 2012 which resulted in losing the then LTA of 1.8 million. I have lodged a complaint with the financial ombudsman

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