Doctors / GPs

Are you happy with your NHS Pension Scheme?


Louise Misiewicz

Tax Consultant

5th February 2018

Article relevant to the tax year 2017/18.

Is your NHS Pension Scheme giving you a decent return?

I was chatting to a new GP client last week. Some of his concerns regarding increased taxation of medical professionals are worth highlighting. We were chatting about recent taxation changes, and the impact on senior medical professionals in the UK. I also highlighted the potential impact of changes to pension taxation that took effect from April 2016.

Changes to the annual allowance and lifetime allowance mean that higher-earning GPs could face an increase in excess of £20,000 in the tax bill they have to pay next year.

Many of my GP investment clients claim that although they feel the NHS Pension Scheme remains the best option for most doctors. Especially those in the early stages of their medical careers. Rising costs means that many more experienced and older doctors have been thinking about leaving the Scheme.

Should GPs consider leaving their NHS Pension Scheme?

I advised my GP client that the annual allowance of £40,000 was tapered in the 2016/17 financial year for anyone who’s total income exceeded £150,000 – including pensions savings and investment income.

It is also worth considering that doctors who’s annual growth in pension benefits exceeds the annual allowance. Will be taxed at a rate between 40-45% on the excess.
Many GPs may not realise until too late if they are subject to extra tax.  This because their annual income only becomes clearer after the financial year-end. When they submit their self assessment tax return. This means, I believe, that medical professionals will need to plan very carefully.

GPs also pay a higher rate of employee pension contributions (up to 14.5%) which means that for some GPs the NHS Pension Scheme has become even more unappealing in terms of future investment return.

I warned my GP client during our meeting that a significant number of doctors are considering leaving the NHS Scheme, although for many the NHS Pension still delivers a solid return.

As always, it’s worth talking to one of our tax advisors to gain a full accurate understanding of your tax position.

Our team of medical professional accountants are focused on creating greater revenues for your medical professional business such as GPs, locums and dentists, whilst being tax-efficient.

I’ve written a number of related articles which will provide additional reading, including:

Are doctors and GPs making enough money?

Tax planning around IR35 for doctors

Wealth planning for medical professionals

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