Predicted pension tax changes designed to boost the NHS could drive doctors away

Economy & Politics | Healthcare | Reports

Chase de Vere Medical, which is part of Chase de Vere, the independent financial advisers, believes that predicted pension tax changes that could be implemented to provide money to support the NHS, could end up depleting the service by driving doctors away.

It has been reported that the government could reduce the pension annual allowance from its current £40,000 level, in the next budget, in order to help find the extra money which has been promised to the NHS.

Doctors are already dealing with the challenges from previous changes to pension tax rules. In the coming weeks, many will receive an annual pension savings statement detailing the level of contributions they’ve made to the NHS Pension Scheme in the previous tax year. This will bring unwelcome news, as the statements will confirm that they have breached the annual pension allowance and are facing a tax liability.

Even if doctors don’t receive a pension savings statement, it doesn’t mean that they don’t have a pension tax issue. This is because even though statements are, in theory, only sent to those who have breached the annual allowance, the calculations used are based only on contributions made to the NHS Pension Scheme and won’t include payments to any additional private pensions.

We fully agree with the British Medical Association (BMA), which has recently called on the Chancellor for less complex and less stringent pension rules, otherwise there is a real danger that senior doctors will leave the NHS and retire early.

Andrea Sproates, Head of Chase de Vere Medical, said: “Doctors have been hit hard by previous changes to lifetime and annual allowances, including the tapered annual allowance which was introduced in 2016.

“Many are struggling to understand the tax position on contributions to their NHS Pension and are unsure whether they can make any additional tax efficient pension payments. This uncertainty is compounded for those who don’t receive an annual pension savings statement, as they may wrongly believe that they won’t be subject to an annual allowance tax charge, whereas that might not be the case if they are also making private pension contributions.

“If there are further cuts to the annual allowance, this will have a catastrophic effect on the pension planning of many doctors. We will see huge numbers facing additional tax charges and a significant number of the most experienced doctors may leave the NHS altogether.

“It is the most experienced doctors who will be hit hardest by further cuts, as they have higher earnings and have already accumulated greater pension benefits. This also means that they will be most able to retire.

“It is ironic that a plan to provide money to help support the NHS could have the perverse effect of depleting the service by driving some of its most experienced, talented and valuable professionals away.”

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