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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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