Doctors Pension Tax Relief Rules May Be Relaxed

Published / Last Updated on 07/08/2019

Tax relief rules for pensions for NHS Doctors, High Earners and Clinicians may be re-considered in a report by the HM Treasury. 

What's the problem?

Currently, pensions rules for higher earners reduce the amount you can pay into a pension under 'Tapered Relief' rules.  In short, for every £2 you earn above £150,000, the pensions annual contribution allowance of £40,000 pa is reduced by £1.  This can go all the way down to a pensions annual contribution allowance of £10,000 pa is you earn £210,000.

If your equivalent pension contribution is linked to salaries, such as doctors, then you easily 'crash' over the £10,000 pa minimum annual allowance meaning that you get an additional tax charge.

Result:

Doctors and Clinicians are leaving the NHS in their droves as there is no point earning more or getting huge tax charges when pension benefits increase.

The Solution:

The Government has proposed to change the rate at which tax relief is withdrawn from pension savings for NHS staff, meaning they can take on extra work and not have restrictions on how much they can contribute into their pension.

In July there were proposals for a '50-50' solution for doctors to half theor pension contributions in return for half the rate of pensions growth accrued only.  Now the Department of Health and Social Care has said they are looking at letting NHS scheme members set contributions in 10% increments, e.g. A 30% contributions rate = 30% accrual rate or 50% contributions rate = 50% accrual rate or if a lower earner unaffected by taper relief, 100% contributions rate = 100% accrual rate.

Sajid Javid Chancellor of the Exchequer commented “this is part of the Government’s plan to improve the NHS, maintaining staff levels and reducing patient waiting times”.

Comment

This will put high earning, and much needed, medical staff in a position to control how much they contribute and how much they accrue in pension without the tax penalties or indeed the need to either cut back on hours worked within the NHS or indeed, leave the NHS.

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