The government has proposed flexible NHS pensions, Dr Benjamin Holdsworth on how to approach the complexity ahead.
One of Boris Johnson’s first moves as prime minister was to scrap the two-week-old consultation outlining a ’50:50’ flexible NHS pension plan and replace it with new proposals to allow doctors increased control to scale down pension contributions or take their employer contributions as salary.
This attempt to ease the current workforce crisis means senior practitioners may be able to adjust their pension contributions in the future in order to change their rate of pension growth. The official line from the Department of Health and Social Care is that NHS scheme members could therefore choose to make contributions in increments while receiving the equivalent accrual rate – possibly building a pension pot at a more gradual rate.
For the many senior consultants facing punitive tax charges because of the ‘tapered’ annual allowance pension savings limits, some degree of flexibility will be welcomed. However, these plans will undoubtedly add significant extra layers of complexity for busy medics keen to get on with the day job.
The annual pensions statements are now ready to obtain from the NHS Pensions Agency. You should request your own statement as soon as possible – it is best not to wait for it to be sent to you – and use this as a basis for detailed discussions with your financial planner to ascertain your current position and the likely tax implications.
It can take several months to receive the statements and many we have seen in the past contained substantial computer-generated errors – adding further challenges to difficult calculations. 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 by the untrained eye. Seek help without delay.
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. www.cavendishmedical.com
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.