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Tax Windfall and GP Partner Cost Increase with NHS Pension Changes

With the 2015 NHS Pension scheme, doctors under the age of 50 were denied benefits offered to those closer to retirement age. Last year, the Supreme Court ruled that these changes to some public sector pension plans were unlawful and now the government is working on ways to resolve the discrimination created from the changes.

This does not constitute advice and advice should be sought in all instances before acting on it.

There are currently two options being considered. Whichever way the government goes, however, pension scheme members will be able to decide which set of scheme benefits is better for them for the period from 1 April 2015 to 31 March 2022.

The government has until 11 October to deliberate before making their final decision.

Pension options

Option one will have doctors choose which pension plan they want to choose in 2022 (for the period mentioned above).

Option two will mean doctors have to wait to decide at retirement.

The good news is that discrimination will no longer be an issue, but it won’t be without some challenges. Experts have concerns about the costs and bureaucracy righting the wrong might bring.

In July, a consultation document was released that laid out the two proposed approaches. The document makes it clear that these changes will cost about £17bn and that the additional expense will need to be recouped somehow.

The responsibility of funding these changes will, unfortunately, fall to employers, raising their contribution rates once the 2020 scheme valuations have been completed. NHS funding will need to be provided to cover costs in that sector and for general practitioners, partner costs will increase, too.

Employer contributions

Andy Pow of Mazars LLP, a specialist medical accountant, has said, “The concern would be that employer contribution rates have to increase to cover the increased benefits arising from this,” and that “If that funding doesn’t flow through to general practice, ultimately it will be partners picking up the cost at practice level.”

It’s not all doom and gloom.

For some GPs, this presents an opportunity for a tax windfall as the retrospective changes mean they could reclaim part of their tax bills. This is decidedly a positive side effect of this ruling for doctors who are members of the 2015 NHS Pension scheme.

Pension planning

Your pension is the foundation for your retirement plan and the money you’ve saved over the course of your career will help feed the lifestyle you wish to lead when you no longer have to worry about working. So, anything that could affect your pension pot needs to be taken seriously. Whether you were impacted by this particular setback or not, a pension review is always a good idea.

If you need help deciding which of the scheme options is the right one for you, don’t hesitate to reach out to us. We’ll be happy to review your current plan within the scope of your entire financial plan and we can help determine if any action is required to ensure you’re on track to living the way you worked hard for in retirement.

Are you ready to review your pension plans?
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
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