Doctors earning £100,000+

One of the points that the Chancellor made in his Budget last week was that employees of state institutions, (such as the NHS) with earnings over £100,000 would be making larger payments towards their employer pension scheme. Doctors have already seen pension contributions rise from the standard 6% of pensionable pay to typically 7.5% if earnings are up to £105,319 but 8.5% if they are more than this. Many of our clients with various awards are therefore paying 8.5% towards the NHS Pension Scheme already. The Chancellor seems to be suggesting that this will rise.

There is increased pressure on the State purse and I imagine that the retirement age on the NHS Pension Scheme will gradually be increased to something more in-line with the State Pension.

As the new 50% tax regime comes into effect (assuming it will) from April 2011, the Chancellor made his restrictions on pension provision even tougher. Having originally advised that those earning £150,000 now cannot make pension contributions above £20,000 if they are to obtain 40% tax relief, this has now been reduced to £130,000 catching even more people. To say that pension rules have now become complicated would be a masterful understatement. The Government promised us all a new regime of Pensions Simplification from 6^th April 2006. This has been made a complete nonsense with rule upon bureaucratic rule ever since.

The framework for pension planning is undergoing some fairly significant testing at present, all in the name of saving money. Regrettably, I suspect that this will have precisely the opposite effect. The Government’s anti-forestalling measures for this and the next tax year are “problematic” for most Consultant doctors. The restrictions on contributions towards pensions are still somewhat undefined, but one possible interpretation would be that anyone earning more than £130,000 and contributing more than £20,000 a year (employee and employer) towards “pensions” will suffer a 20% tax charge on the excess. This rather uncomfortable point has yet to be properly clarified.

It is therefore important that we receive accurate information about your pension benefits. Unfortunately, the NHS Pensions Agency made this exercise more difficult from October this year. They now only provide us with very basic details about pensionable service rather than the full service history that we normally request. I might add that the NHSPA have always been very helpful to me and I think that I am still one of the very few IFAs that has ever taken the time to make a personal visit to Hesketh House and understand the practical problems that the administrators have.

Consultants also have an above average change of an HMRC investigation, so I think it safe to say that ensuring that you are well advised is more important than ever.