By: 5 November 2018
Money Matters – Will you walk into a tax trap?

Dr Benjamin Holdsworth on why you should request your annual pensions statement now   

Now is the time to actively request your pension statement from the NHS Pensions Agency if you have not already received it.

The ‘annual allowance’ limits the amount of tax-free pension savings which can be accrued per year to £40,000. In autumn every year, the Pensions Agency issues letters detailing doctors’ annual pension contributions for the preceding tax year, but only if the doctor has ‘deemed growth’ in their pension pot of more than £40,000.

However, there is a new ‘tapered’ annual allowance for those with earnings over £150,000 which reduces this figure further, down to just £10,000 for high achieving doctors. The NHS will not issue letters to individuals breaching this cap, yet senior doctors could easily breach the ‘taper’ with their annual pension growth. Any private pensions will also count towards whichever annual allowance is relevant to you and the NHS Pensions Agency will not be aware of them. Remember that excess pension savings are taxed at your marginal rate of income tax.

You should request your own statement as soon as possible – the Pensions Agency is not the quickest to respond and you should allow time to check all the calculations thoroughly before filing your relevant tax submission. Many of the statements we have seen have contained errors and you could discover all too late that there is a substantial tax charge to pay.

HMRC calculates the contributions for a defined benefit scheme such as the NHS very differently to that of a private pension. The figures are based on the deemed ‘growth’ of the pension in that year with an allowance made for inflation rather than the actual contributions. The statements are therefore difficult to understand and mistakes can go unnoticed.

As in all matters financial, forward planning is the key to avoid unpleasant situations and unnecessary tax bills.


Dr Benjamin Holdsworth is director of Cavendish Medical – specialist financial planners for medical professionals in the NHS or private practice. For a second opinion on your finances, please contact us on 020 7636 7006.


The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.