Sunday, March 29, 2020

Pension Revamp Is A Tax Tonic For Doctors

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The government is writing a prescription to cure the pension ills of doctors facing tax problems.

High-earning doctors have retired or cut their availability to the National Health Service because their pension growth was outperforming the lifetime allowance (LTA).

The LTA is set at £1.055 million – but any pension pot exceeding the allowance faces a 55% if benefits are taken as a lump sum or 25% if taken as income.

But doctors have done a deal with the government with a 50:50 option that allows them to halve their pension contributions providing they accept half the value of fund growth at the same time.

50:50 pension option

The measure effectively slows down the rate of pension fund growth and lets doctors work longer before their pots breach the LTA.

Senior doctors were concerned that pension tax charges discouraged them from taking on extra work to support patients and led them to consider if they should stay in the NHS Pension Scheme.

An independent review of the GP partnership model found this issue was a factor for many GPs in deciding to retire early, with 610 (57%) of GPs who retired in 2018 to 2019 taking early retirement.

Announcing the plan, Health and Social Care Secretary Matt Hancock said: “Our NHS runs on the hard work and dedication of brilliant staff who deliver world-class care for patients every day. Each senior consultant, nurse or GP is crucial to the future of our NHS, yet we are losing too many of our most experienced people early because of frustrations over pensions.

NHS People Plan

“We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.

“The reforms we are setting out today will give clinicians greater flexibility to manage their pensions, have more control over their future, and offer a deal that’s fair to doctors, taxpayers, and the patients they care for.”

The move is the first part of the government’s NHS People Plan, a strategy aimed at resolving recruitment issues for doctors, nurses and support staff that improves the NHS as a work place.

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