NHS Doctor Pensions - For the few, not the many

[MBennett]

I wouldn’t worry about it. In the next financial crisis which is a when and not an if, the legislation is now in place for a bank bail in rather than a bail out. This means that people with more than x amount in the system (pension or otherwise) will be the recipient of a large haircut of their personal wealth, to save the banking system of course.

 

[KingOfTheDaves]

If you work for the NHS you are in a defined benefit scheme so how much you pay in contributions has absolutely no affect on your annual allowance (unless they are additional voluntary contributions).

For defined benefit schemes the annual allowance is based on the increase in accrued pension over the tax year (multiplied by 16 after taking inflation into account). That has to be over £40k.

If your salary is increasing faster than inflation (especially if you are already on a high salary) then yeah you are likely to be caught out each year. The Tories like indirect taxation, take it up with them

 

[eviled]

You are mixing up with the tapered annual allowance.

your threshold income is over £110k and your adjusted income is over £150k

Nope, they are closely related and usually become relevant at similar levels in the NHS pension scheme

 

[Minstadave]

Nope, they are closely related and usually become relevant at similar levels in the NHS pension scheme

The taper and AA are like the double whammy of tax hits. Get a pay rise that takes you into the taper and your if fantasy pension pot grows over 40K and you'll get taxed on the growth above 40k and also lose tax relief on some of the 40k depending on your income.

You can pay more in tax than the you extra amount you earn, but you will still have a small amount of pension growth.

 

[Minstadave]

No, The Tax just limits the amount that you can put into your pension plan.

Pension plams are not the only investments that are possible, nor are they the only tax friendly one. (Though they are currently the most tax friendly one)

Carrying on working but without increasing ones pension contributions/entering a higher tax rate band is not going to make anybody worse off. Just that you wont be as well off as the increase in pre-tax income might have suggested.

Now, you might feel that entering a higher rate tax band means that there is no point in making the extra effort for relatively little additional gain, And that I can understand, but it is also a different matter

But think what it would have been like back when the UK was a pre-Thatcher socialist paradise with marginal tax rates that under some circumstances exceeded 90%

It's not even being limited by the pension input, I can bail out of the pension scheme part way through the year and lose my employer contributions (which I dont see anyway).

Going near the taper will also penalise extra work even with bailing out of the pension scheme early that year as I'll lose tax relief on my 40k pension growth progressively.

The true issue is actually figuring out the numbers with two pension schemes growth plus ongoing input. You've also got to model carry over for future increments as you dont want to be caught short at increment time.

It's far easier just not to work than risk facing a tax bill. Which is what many colleagues are doing. Everyone is dropping work to keep below the taper and bring down their basic salary to keep pension growth below AA.

 

[KingOfTheDaves]

Nope, they are closely related and usually become relevant at similar levels in the NHS pension scheme

It's my job to know the difference between the two, but please carry on telling me how I am wrong.

your threshold income is over £110k and your adjusted income is over £150k

The tapered annual is ONLY applicable if the 2 points above are met. And nothing you claim will change that fact.

https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

HMRC even provides a handy calculator if people want real answers

 

[Destination]

Well as I demonstrated earlier, it is possible to earn 75K in pensionable earnings, take home 43K of that, and still be over the threshold for the annual allowance for pension contribution (due to pot growth of a pot that doesn't exist), nowhere near taper limit, nowhere near the additional rate of tax, but with an almost 2K tax bill to pay.

 

[eviled]

You said I was confusing the 2, I said “nope”,
and then stated “they are closely related”
As they both include calculations to do with pensions contributions they seem related to me.

Which bit did I get wrong?

The Gov.uk website is what I’ve been basing my financial planning on.

Not being argumentative or claiming superior knowledge, please educate me if I’ve got the wrong end of the stick

 

[KingOfTheDaves]

You said I was confusing the 2, I said “nope”,
and then stated “they are closely related”
As they both include calculations to do with pensions contributions they seem related to me.

Which bit did I get wrong?

The Gov.uk website is what I’ve been basing my financial planning on.

Not being argumentative or claiming superior knowledge, please educate me if I’ve got the wrong end of the stick

You are right in that they are both 'to do' with pension calculations and seem related, but there are very real tax implications if you get it wrong, which has ended up with people being fined thousands of pounds by HMRC. So maybe I am being picky here, but I do feel that information needs explaining further.

I'm assuming you are in the NHS as the information will be different if you aren't. Firstly the Annual Allowance and the Tapered Annual Allowance does not involve pension contributions, with the exception of AVCs (as I stated in post 102).

Annual Allowance
Every year your pension scheme is required to calculate your 'Pension Input Amount' (this is basically the increase in accrued pension over the tax year). If the PIA is over the Annual Allowance (after taking the previous 3 tax years into account) then you can either get taxed on the amount over the AA at whatever your tax rate is or you can go 'scheme pays' where your pension is reduced instead.

Tapered Annual Allowance
This is for high earners and is a reduction in the annual allowance the maximum £40k, to potentially as low as £10k. Which as I stated, requires a persons threshold income to be over £110k and the adjusted income to be over £150k.

 

[Buddy]

https://www.bbc.co.uk/news/health-48903913

Just going to leave this here. This applies to GPs as well.

 

[neviditelny]

I must say that I find that the UK tax system is incredibly confusing... But I'm not surprised this is happening though

 

[Fine]

So if I'm in a db scheme, adding avcs and my total notional pot rises by more than 40k a year I have to pay tax?

Won't that hit people who have a decent sized dc pot that is growing well?

40k doesn't sound very much.

 

[Minstadave]

So if I'm in a db scheme, adding avcs and my total notional pot rises by more than 40k a year I have to pay tax?

Won't that hit people who have a decent sized dc pot that is growing well?

40k doesn't sound very much.

Yes. Doubly so if the taper pulls down your 40k threshold.

You can go over 40k without contributing at all that year.

 

[Azza]

A consultant at one trust said that unless ministers acted, about 30% of total consultant time could become unavailable to the NHS, if enough kept scaling back their hours.

30%!! wow




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Just pay them less wages or get the junior doctors on lower wages to do the extra hours work ... after they've done their 12 hour shift in A&E of course.

 

[Minstadave]

30%!! wow




trollface.jpg


Just pay them less wages or get the junior doctors on lower wages to do the extra hours work ... after they've done their 12 hour shift in A&E of course.

You know this will be the plan.

 

[KingOfTheDaves]

Easiest way to fix this would be to make overtime non-pensionable.

Have the pension just be based on the basic salary. That way you can work overtime and get paid for it, but it won't add to the AA issues.

Sure doctors will end up with a smaller pension at retirement, but it will still be decent given their basic wage. It's better than a tax bill every year anyway.

 

[The_Abyss]

No, the easiest way to fix this is to fix the broken pension taxation system, not just apply a sticking plaster approach for one particular set of workers.

The government was warned about this years ago, and they’ve done nothing. HMRC knew for the same period of time, and has failed to act or consult. It is a negligence of governance.

 

[Freakbro]

No, the easiest way to fix this is to fix the broken pension taxation system, not just apply a sticking plaster approach for one particular set of workers.

The government was warned about this years ago, and they’ve done nothing. HMRC knew for the same period of time, and has failed to act or consult. It is a negligence of governance.

They've been rather occupied with something else these last 3 years

 

[The_Abyss]

They’ve had longer than three years. And these outcomes were entirely predictable when they considered setting policy. If they actually considered anything other than a supposed fiscal or political benefit...

 

[SPG]

So we invest in our people train more up and stop putting doctors on pedestals of we are so important.

Far far to many over inflated egos about being Doctor.