NHS Consultants in the London region
Dominic has been advising many of the top Consultants in the London area for over 20 years. As a Consultant you joined an excellent NHS pension scheme, however due to the way the previous and present Governments have responded to the financial mess created by excessive house prices, cheap credit, poor lending and foolish investment strategies, Consultants now find themselves in a highly complex tax system and the HMRC have made it very clear that they target Consultants with Private Practice earnings.
There are few in society that have had to put up with a sustained attack on previously safeguarded benefits as Consultants earning over £100,000 a year. It would certainly appear that a career in medicine has become tarnished by working within a system controlled by central Government. Pay scales have been frozen since 2009, awards challenged and reduced, whilst cuts have made the practical work more pressured.
There have been changes to tax rates, the top rate of tax is not 45% but 60%. This applies to a proportion of income above £100,000 and of course earnings above £150,000 are currently taxed at 45%.
You may remember that the previous Labour Government introduced new rules about pensions, which they called “pension simplification” or “A-Day”. Many Consultants were encouraged to place Private Practice premises into a pension to gain tax advantages. When the credit crunch came and new restrictions on pension contributions were introduced this became very problematic. To make matters worse the NHS Pensions Agency struggle to value the benefit of your NHS pension, making it very difficult to avoid tax on annual allowance “excess contributions” which most Consultants cannot determine as they are set by the NHS Pension Scheme contribution rates.
Of course the NHS Pension Scheme itself has been revised, doubling contribution rates, abolishing Added Years and the goalposts for many have been considerably moved, increasing the age of retirement benefits and the final salary used to calculate your pension – moving to career average earnings. Much was made of the new 2008 NHS Pension Scheme, but even then Government failed to do its sums properly, meaning yet another review, resulting in the 2015 NHS Pension Scheme. The original 1995 NHS Pension scheme members have had various choices (chances) to “jump ship” to the newer arrangements – which have later retirement ages (65 for the 2008 scheme, and the State Pension Age for the 2015 scheme…. whenever that may be!).
There have been attempts to protect those with benefits built up in the original pension, but much of this has come to nothing due to peculiar rules which largely make Fixed Protection 2012 redundant and many forced to live with the prevailing Lifetime Allowance rules. There is further complexity for the Annual Allowance which is easily exceeded with a relatively modest increase in pensionable salary. Those most impacted are those newly in receipt of a National Award – which inflates pensionable pay and creates a genuine tax problem – irrespective of the fact that the eventual retirement income is not certain as awards are reviewed every 5 years.
These rules have not been repealed by the Coalition Government, indeed one might suggest non-action is perhaps dleiberate. Most Accountants, even those that claim to specialise in the medical field, struggle to make sense of the rules. We work with your Accountant, helping you to reduce your tax payments. Whatever the state of the pension system and irrespective of who is running the country, we can help you to create a proper financial plan that identifies what you need to support your lifestyle and how to create and maintain a robust investment portfolio.