Three-quarters of doctors unsure on annual and lifetime pension allowances

Doctors across the country could risk facing unexpected tax bills next month, Wesleyan has warned, after its research revealed that 75 per cent of GPs do not know the annual and lifetime allowance limits on pension savings.

The survey also found that nearly a third (31 per cent) of doctors do now know which section of the NHS Pension Scheme they are in, which it warned could affect their retirement age, pension earnings accrual and retirement income.

Issues around the tax allowance made headlines prior to the pandemic, with NHS providers warning of a potential "exodus of NHS leaders", and many doctors retiring early or cutting their hours to avoid the issues.

The government subsequently increased the earnings threshold for the tapered annual allowance from £110,000 to £200,000 in the 2020 Spring Budget, in hopes that this may ease the problem of high earning staff cutting their hours.

It also introduced the Annual Allowance Charge Compensation Scheme, which Wesleyan noted has gone "some way to alleviating the tax burden" .

However, it urged GPs to take necessary steps ahead of the tax deadline, 31 January, to avoid any unwanted charges, noting that those wishing to use the compensation scheme will still need to notify HMRC of any changes by the end of January, and complete a Scheme Pays Election Form by 31 July.

In addition to this, it also warned that there is now the “added complication” of the ongoing age-discrimination legal challenge, the McCloud judgment.

The firm explained could that this ruling could mean that some NHS pension members will see their annual allowance input and associated tax charges change retrospectively.

Despite this however, just seven per cent of GPs surveyed claimed to understand the judgement’s impact on their own personal situation.

Industry experts have previously urged the government to provide public sector scheme members with support in considering their pension options amid the McCloud response, with the British Medical Association also emphasising the need for any age discrimination remedy to be "tailored for all doctors".

Commenting on the findings, Wesleyan head of medical division, David Noon, stated: “Annual allowance remains a complex component of defined benefit schemes like the NHS Pension Scheme but it is still alarming that doctors remain unaware of what this means for their tax obligations.

“For clinicians with complex tax affairs, the charges can be hard to swallow, with some being forced to take on significant debts to settle the outstanding bill.

“Previously we were seeing more and more practitioners opting to reduce the number of hours worked creating a staffing shortage – something that is hard to come to terms with against the backdrop of the ongoing pandemic.

“It is now more important than ever that doctors remain aware of their tax liabilities and submit the necessary information before the self-assessment deadline at the end of January to avoid being penalised further which in the current climate would seem a harsh reality considering the fantastic work they’re doing supporting our country’s health needs."

He added: “If the process wasn’t complicated enough, the ongoing McCloud judgement will certainly throw more annual allowance charges into question as members face the possibility of choosing either the legacy or reformed scheme after the 2015 public sector pension reforms were found to have unlawfully discriminated against young members.

“A complete overhaul of the annual allowance system would make NHS Pension Scheme members financial planning more accessible, but for the immediate future we must continue to support our hard-working clinicians to ensure that they don’t fall foul of a complex system.”

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