Cookie policy notice

By continuing to use this site you agree to our cookies policy below:
Since 26 May 2011, the law now states that cookies on websites can ony be used with your specific consent. Cookies allow us to ensure that you enjoy the best browsing experience.

This site is intended for health professionals only

At the heart of general practice since 1960

Reduction in pensions tax relief to hit thousands of GPs

Thousands of GPs will be hit by the Chancellor’s reduction of tax relief for pensions savings, GP leaders and accountants have warned.

In his autumn statement today, George Osborne announced the Government will reduce the amount of money people can save annually and in their lifetime savings before incurring tax.

From 2014-15, individuals will receive tax relief for the first £40,000 of their pensions contributions, down from £50,000. They will also stop receiving tax relief when their lifetime pension contributions exceeds £1.25m – down from £1.5m.

A BMA spokesman said: ‘The change to the tax allowance on pensions savings will affect thousands of doctors – not just the highest earners. Doctors with long service in the NHS could be facing a large tax bill. This is on top of the whole raft of changes the government is implementing to NHS pensions including raising the normal pension age and hugely increasing contributions.’

Dr David Bailey, deputy chair of the BMA’s pensions committee, added: ‘Our initial assessment of the £50,000 annual allowance was that it wouldn’t affect that many GPs. The £40,000 allowance will affect a significant number more.’

Paul Samrah, a medical accountant with Kingston Smith, warned GPs should consider all their pensions arrangements and not just their NHS pension.

He said: ‘Bringing the lifetime allowance down to £1.25m will bring more into the net. At £1.5m it was only the high earners. It might now affect those GPs who aren’t close to the retirement age.’

The additional tax GPs will face would be taken out of their pension pot when they claim their pension, rather than immediately, he said.

Bob Trunchion, a spokesperson for the accountancy firm MHA MacIntyre Hudson, said: ‘The reduction in the Pensions Annual Allowance from £50,000 to £40,000 will have a disproportionate affect within the medical profession, particularly for GPs whose pension fund is uprated annually by a dynamisation factor over which they have little control.’

‘A GP with 30 years’ service and earning in the region of £120,000 could easily fall into a tax charge by exceeding the annual allowance.’

Keith Taylor, head of medical services at RMT Accountants & Business Advisors, said: ‘Reducing these allowances… will make this impact felt even more deeply and widely, and could also further exacerbate the tax problems we’re expecting to see hit many GPs in the new year and beyond.’

Readers' comments (15)

  • If GP's are as hard up as they claim on this site, and pay so low, then the reduction in the cap on tax relief to a mere £40k pa wont be an issue

    Unsuitable or offensive? Report this comment

  • I can hear the footsteps of thousands of GPs heading for the retirement exit asap to avoid this!

    There will be a mass exodus I think.

    Unsuitable or offensive? Report this comment

  • re "If GP's are as hard up as they claim on this site, and pay so low, then the reduction in the cap on tax relief to a mere £40k pa wont be an issue"

    When you have understand the issue comment on it.Until then don't comment!

    Unsuitable or offensive? Report this comment

  • What will happen is that many experienced GPs will stop contributing to the NHS pension scheme when in their early 50s, so the revenue going back into the scheme will plummet. Government scores a spectacular own goal. Show how little they understand how the scheme works. I am 45 and will probably keep paying in until aged 50, then cease further contributions. There are other ways to invest other than inflexible pensions.

    Unsuitable or offensive? Report this comment

  • I am also planning to stop contributing
    at age 50.
    I am 47 and do not plan to work beyond 60
    So the extra cost of contributions together with
    Reduced annual allowance together with
    Actuarial reductions on any pension accrued from
    2015 (40%if taken at age 60)makes it unattractive
    I will look to either save in other ways or just live a lot!

    Unsuitable or offensive? Report this comment

  • Reducing the pension cap to 40k will not effect many GP's, need to be earning over 160k.
    The reduction in the pension pot to £1.25m will effect a lot of GP's . This will effect any GP who's pension is more than £50k when they retire

    Unsuitable or offensive? Report this comment

  • So what will happen is a lot of GPs who are in their mid to late 50s will take 24 hour retirement and return on reduced hours or discover it is quite nice not working so much and do locums or part time work , eitherway massive work force crisis in 18 months from now . Maybe not a good idea to earn more than 100k pension and salary as after this you loose your personal allowance anyway.

    Unsuitable or offensive? Report this comment

  • By far the main reason to contribute to any pension scheme is the tax relief, otherwise you would just invest yourself. As the Government gradually reduces the benefits of the NHS Pensions Scheme and increases the contribution rates the incentives to remain contributing decrease. If Tax relief goes it is almost a no brainer to stop contributions until eventual retirement and make your own investments over which you have more control.
    I think there will be many Doctors who either retire sooner or suspend contributions.

    Unsuitable or offensive? Report this comment

  • Re : Reducing the pension cap to 40k will not effect many GP's, need to be earning over 160k.
    The reduction in the pension pot to £1.25m will effect a lot of GP's . This will effect any GP who's pension is more than £50k when they retire

    Sadly, not. Due to the dynamisation of income over inflation (CPI), GPs with high dynamised earnings will suffer badly. For example, a GP with £3.5M of dynamised income will benefit from this being increased by 1.5% over inflation each year. This increase alone uses £13,965 of the £40,000 allowance. Earnings/profit of £100,000 a year will use the rest of the allowance.

    The real issue comes when inflation rises over the course of the year. For example, a rise of 1% in inflation over the year, using the same figures above, will use £23,275 of the £40,000 allowance. Any GP with income/profit over £60K will then exceed the allowance. Take into account any added years being purchased and you have a real problem.

    Unsuitable or offensive? Report this comment

  • silver surfer

    Jon foster has hit the nail on the head.The troops need to realise that its the value of your pension over a fiscal year not the amount you put in each year.Its quite a complicated calculation but basically any GP over 45 on average earnings with some added years will be affected.GPs are in a difficult position.If we stay in the scheme we are obliged to contribute at a set rate and have no control over this.Last year for example inflation was 5.2% add on 1.5% quite a few were going to be hit at 50000,now with 40000 the numbers will be huge.I cant believe our pension negotiators did not see this comming and lobby harder on our behalf.A couple of percent on superann yearly will seem like a pitance after this

    Unsuitable or offensive? Report this comment

View results 10 results per page20 results per page

Have your say