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Proposed Budget pension tax changes threaten NHS doctors

The predicted Autumn Budget pension tax changes supposedly to be implemented to provide money to support the NHS, could end up depleting the service by driving doctors away, according to financial advisers Chase de Vere.

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

But Chase de Vere argues that doctors are already dealing with the challenges from previous changes to pension tax rules. In the coming weeks, it says 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 and predict this will bring unwelcome news, as the statements will confirm that they have breached the annual pension allowance and are facing a tax liability.  It also warns that 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.

 The British Medical Association (BMA) has recently called on the Chancellor for less complex and less stringent pension rules, also warning of 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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