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Further Flexibility For NHS Pension Holders Announced By Government

Only a few short weeks ago, the Department of Health and Social Care released a consultation document with their proposed changes to the NHS Pension Scheme. This has already become old news when a few days ago the Government announced a new consultation which promises even greater flexibility.

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 

The tapered annual allowance problem

The tapered annual allowance has been at the centre of talks between the government and the British Medical Association as they attempt to reach an agreement on how to resolve the issues with the current arrangement. The unfortunate implications of tapering have pushed many high earning healthcare professionals to evaluate, and in most cases, reduce the amount of time they dedicate to NHS work because they have been eating away at their pensions in order to handle the unexpected tax bills they are saddled with after breaching their annual allowance.

What’s different about this new proposal?

The original proposal was for a 50:50 option for doctors to manage the growth of their pension pots wherein they could reduce both their pension contributions and their pensions accrual by 50%. This was met with a lukewarm reception by NHS representatives and additional news concerning NHS staffing issues scuppered its chances further.

The new proposal offers senior clinicians greater flexibility in their contribution rate as well as their accrual rate, besting the previous 50% reduction/accrual combination by allowing them to elect any amount in 10% increments.

The proposed changes would be set to take effect in the new tax year, April 2020, and allows senior clinicians to set their desired percentages at the start of each tax year. Employers will also have the option to compensate senior clinicians with additional salary in lieu of their saved employer contributions.

It’s not perfect…

While this is a step in the right direction, it does not resolve all the issues, namely the £110,000 threshold income limit. The changes could, in fact, exacerbate the issue as a reduction in employee contributions will only increase the level of threshold income and a decreased contribution rate will diminish pension benefits for retirement. And the issues with calculating annual allowance amounts still remains.

Your next steps

If there’s anything to glean from all these suggested changes is that professional advice is even more important moving forward in order accurately predict tax burden and implement a strategy to cover any money owed.

Our lead financial adviser, Darren Scott-Guinness provides carry forward and tapering calculations free of charge as part of our client commitment to help healthcare professionals to save money. This service has already helped many doctors and dentists to save money, so let us help you too.

Need advice to protect your future?
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.
Call Darren to discuss your options.

Tel: 01403 780 770


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