NHS Doctor Pensions - For the few, not the many

[Semple]

I'm struggling to see why this is a problem?

Indeed, woe me, I’ve earned too much over my career. What?

99% of the population would love to be that well off. If people reach the point where they feel they might as well retire the only real solution to that is pay them less/tax them more.

I've gotta agree here as well.

As Angillion points out, that 1million tax free pot allows for a very generous yearly retirement allowance.

Is it not possible for them to opt out of pension contributions and funnel that money towards private savings instead? Albeit without the overly generous NHS pension topup.


The allowance is only contribution based though right? So that would exclude any growth the pot has? Frankly those are some insane yearly contributions.

If someone is earning £48,000 a year and they invest 6% along with their employers 6% contributions, they're putting in 5.7k a year. Lets assume they then work 40 years (one would assume there would be increases to the salary) their overall contributions are at a minimum of 230k maybe upto 270/280k.

In fact looking at it in reverse, to hit a £1mil limit over 30 years would require putting at least 30k a year in. Based on a 10/10 contribution split, that would make a yearly salary of ~150k.

 

[Minstadave]

Annual allowance isn't contribution based, but based on growth of your fund. You can go over AA without even contributing a penny that year is my understanding as an increment in your salary can increase your pot value enough to burn up your AA.

The taper is based on threshold income that year.

Lifetime allowance I'm not sure about. I think that is based on growth rather than contributions.

Lots of colleagues are doing what they call the "hokey cokey". Dipping in and out of the pension scheme every year. Others are simply shedding work to keep below the taper.

 

[Angilion]

A different way of looking at this is that above a certain threshold of hours/sessions worked the employee is not getting paid to work. [..]

That's certainly a different way of looking at it, but how is it true?

 

[Destination]

So where are all these doctors and consultants going then? Are they all retiring.?
I don't think the scenario outlined above is actually an issue at all, those same people would complain vehemently about nhs funding yet are happy to accept huge salaries and pensions.
Where do they think the money comes from, a magic money tree?
People on huge salaries having to pay a bit more tax on a pension pot 99% of people can only dream of is not the most pressing issue.

You can work that extra weekend, or do the extra theatre session to help out an understaffed NHS, but we're not going to pay you, in fact, we will pay you, then we'll critically tax you at a differential rate and modify your pension negatively for doing so.
Why on earth would anyone work the extra session?
So there is further delays to treatment, and further issues with numbers of doctors and retention.

People saying you've enough tax relief, yeah maybe people do, the issue with an NHS pension is the 1M pot won't generated anything like 50k a year as it isn't a pop, its a theoretical pot created by the govt.
Tax is paid on the actual pension, so it isn't free money at both ends.

 

[Destination]

I've gotta agree here as well.
Is it not possible for them to opt out of pension contributions and funnel that money towards private savings instead? Albeit without the overly generous NHS pension topup.
Te allowance is only contribution based though right? So that would exclude any growth the pot has? Frankly those are some insane yearly contributions.

The allowance is pot growth based.
It isn't contribution based, if it was contribution based there wouldn't be this issue.
I doubt many doc is making 40K a year of contributions.
If my pot is large and I am 10 years away from retirement, then pot growth, of which there are now two due to the govt rejigging the pension is a major factor.
The 'overly' generous NHS topup you speak of, at the high end they are making contributions of 14.5% for a career average pension now under the 2015 scheme.
It isn't the generous last 3 years scheme that used to exist.
Those boys are getting their money, having never had to deal with the annual allowance, and used to make contributions of 6%.

 

[danlightbulb]

Final salary pensions should be scrapped across the board these days. Most private companies have dropped them now so should the public sector. They were never meant to be used (abused) by high earners.

 

[willhub]

As above - not really even the annual allowance which is the problem - it's the lifetime allowance which is the issue. It's been steadily cut from £1.8 million to £1million last year (£1.055 million this year)

I have a client who works for EDF energy in a middle/high management position - he's 58 years old - worked there since he was 20.....His pension pot is currently valued at £1.4 million. Way over the current lifetime limit.

His salary is around £80k so certainly not massive by any means. He technically has another 7 years to work but it's almost certainly pointless to do so in terms of his pension situation as anything he accrues from here will cause even more tax issues down the line.

It's set at a ridiculously low level and will catch a lot of people out who have benefited from DB/Final salary schemes over the years.....Most people don't even know they have any issues - Scheme trustees don't bother telling people they have an issue - usually falls to the individual to find out.

Don't think there is any issue there, on the salary alone you could save or invest yourself aside from a pension using disposable income. No empathy with someone on 80k.

 

[eviled]

Currently there is little or no motivation to do work due to the tapering AA. Meaning that consultants that once did extra sessions, waiting list initiatives or went the extra mile to earn Clinical Excellence Awards have all had to stop. Colleagues are dropping PAs across the NHS

Exactly

Its not about wanting tax breaks or more pension or even different rule to anyone else

This country is woefully short of doctors, if your a consultant/GP in the prime of your career and opt to do extra work then you take home pay will stay the same, actually it will increase but you will get and end of year pension tax bill that will negate it and also come as quite a surprise because the complicated annual allowance tax calculations can only be worked out retrospectively!

example
55yr old consultant surgeon does several extra days operating on top of their full time work to help cut down waiting lists, all NHS work is pensionable so they get paid extra and make extra contributions.
A the end on the year their 14.5% pension contributions + the 14.5% employer contributions + their pension pot growth of 30+yrs of contributions are >£40,000.
End of the tax year they are hit with a £10,000+ tax penalty and probably another tax penalty when they retire.

this works out that they have done the extra work for essentially free (and is nothing to do with the type of pension scheme they are in)

The result
why pick up extra work for free, waiting list increase, number of hour per senior doctor are essentially capped

 

[eviled]

The debate about senior doctors salaries (someone in the prime of the career with probably 2-3 degrees and a lifetime of post-graduate qualifications directly responsible for taking huge calculated risks with people lives) is another one.

If you want senior doctors to pick up the slack for the country not having enough doctors per head (less than nearly the whole of Europe) then it seems fair they are paid for that work doesn't it?

 

[Dirk Diggler]

What's the pension limit being discussed here? Are all pensions limited to £1M pot estimate?

I pay 10% of my salary into my pension for tax efficiency and my employer contributes 5%. I had no idea there were limits?

 

[Jokester]

You get tax relief on upto £40k payments into your fund a year, then your total lifetime pot value has a cap of £1.03m after which the excess is subject to additional tax when you draw down on it.

 

[ultralaser]

The debate about senior doctors salaries (someone in the prime of the career with probably 2-3 degrees and a lifetime of post-graduate qualifications directly responsible for taking huge calculated risks with people lives) is another one.

If you want senior doctors to pick up the slack for the country not having enough doctors per head (less than nearly the whole of Europe) then it seems fair they are paid for that work doesn't it?

Clearly it's not a different debate. Many of us work in sectors where those on salaries upwards of £100K are expected (without additional pay) to put in significant extra hours above the normal 9-5.

 

[tom_nieto]

That's certainly a different way of looking at it, but how is it true?

See @eviled ’s response.

The take home pay remains static due to tax on the pension.

 

[FishFluff]

Final salary pensions should be scrapped across the board these days. Most private companies have dropped them now so should the public sector. They were never meant to be used (abused) by high earners.

Most public sector orgs have too. The NHS now uses a career average like most other defined benefit schemes. The contributions are pretty high and scales with your salary. I currently have to contribute 13.5%

 

[Dirk Diggler]

You get tax relief on upto £40k payments into your fund a year, then your total lifetime pot value has a cap of £1.03m after which the excess is subject to additional tax when you draw down on it.

Ah, I see. Does the 40k limit include employer contributions?

 

[tom_nieto]

Clearly it's not a different debate. Many of us work in sectors where those on salaries upwards of £100K are expected (without additional pay) to put in significant extra hours above the normal 9-5.

People’s opinions of what a busy job is are wildly different.

 

[tom_nieto]

Final salary pensions should be scrapped across the board these days. Most private companies have dropped them now so should the public sector. They were never meant to be used (abused) by high earners.

The NHS pension has been average salary for a number of years now.

 

[Jokester]

Ah, I see. Does the 40k limit include employer contributions?

Yes. I can only assume the reason why people are getting tax bills at the end of the year is because they are going over this limit and HMRC are claiming back the overpaid tax relief on their pension payments.

 

[Minstadave]

Clearly it's not a different debate. Many of us work in sectors where those on salaries upwards of £100K are expected (without additional pay) to put in significant extra hours above the normal 9-5.

Are you under the impression that consultants only work 9-5? Or dont do extra unpaid hours?

 

[Dirk Diggler]

Yes. I can only assume the reason why people are getting tax bills at the end of the year is because they are going over this limit and HMRC are claiming back the overpaid tax relief on their pension payments.

In my experience, the tax relief has to be claimed via self assessment so it can't be over payed as such. However, my employer has started taking the pension contributions before tax therefore I assume I would have to pay additional tax back on anything above the 40k threshold.