DOCTOR, DOCTOR… IN THE TELEGRAPH

TODAY’S BLOG

DOCTOR DOCTOR… IN THE TELEGRAPH

You may have come across my details in a piece in The Telegraph on Monday 10 September 2018 by financial journalist Laura Miller. Laura outlines a problem that is being observed in hospitals around the UK, in that some doctors are in the ludicrous position of effectively being forced to reduce their available hours due to the additional taxes that they will suffer for additional income. This has the inevitable potential to create longer waiting lists.

Before we go any further, let me say that Laura asked me to check some sums from a Consultant doctor who was making the point about the annual allowance excess taxes. I have made no secret of the fact that I believe the tapered annual allowance is an utterly stupid Government policy. It isn’t the first and of course will not be the last.

THIS IS GOING TO HURT

My only concern is that some may interpret the information as “greedy doctors worry about tax and so work less”. So I wish to make one point crystal clear. I have advised medics for over 25 years. I have met hundreds of them. I have never, NEVER, not even once met one that was motivated by money as a career choice. The early career of a junior doctor is particularly traumatic and frankly the NHS and Department of Health should be ashamed of the working pressures and timetables that they put them under. If you need any convincing, simply have a look at Adam Kay’s Book – “This is Going To Hurt”. Yet the system continues, because it is always under strain and there are not enough doctors to do the work within “normal” working hours or shifts.

DOCTORS EARNINGS

It is true that some doctors can earn very good incomes. The £10,000 annual allowance only applies to those with income over £210,000 – which is a lot of money by most standards. However, these are people that are highly skilled and at the top of their profession, have given way more than their pound of flesh and are constantly scrutinised for errors and lambasted by politicians and media whenever it suits. For the record, this is not Laura’s intent.

The rather ludicrous rules also impact any doctor whose pension income improves by more than £2,106 in a year. This too would push them over the standard annual allowance and potentially suffer excess tax charges. The tax charge is treated effectively as income tax at the highest rate, despite the fact that the pension has not actually been paid to them, conceivably might never be paid to them if they were to die before retirement. In essence a tax on future, yet to be received income. This sort of rise in pension benefit could come from something as innocuous as moving up the grades, or perhaps for impressive work in the form of Clinical Excellence Awards – or even returning to a full-time post.

HEARING PROBLEM

This is all to do with the way in which the Annual Allowance is calculated for those in final salary schemes. I wrote to the previous Chancellor, twice, without reply on this subject when he presided over the introduced rules. Perhaps Laura will have more success.

Suffice to say this is a complex piece of pension planning, a headache that neither the doctor, nor the NHS really should have to waste time on. Yet my advice is to all doctors is to request a Pension Annual Savings Statement as well as their Total Rewards Statement and ensure all payslips are carefully retained – as well as information about any and every form of income they receive from all possible sources. This is more unpaid work, increased stress and bureaucracy to satisfy some utterly numpty thinking at HM Treasury…. Nothing new in that though is there.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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DOCTOR, DOCTOR… IN THE TELEGRAPH2018-10-10T16:44:32+01:00

Public Sector Pay Rise

Public Sector Pay Rise

The Treasury announced yesterday that various people will be getting an increase in their salaries. This is due to come into effect in October 2018. This is heralded as the biggest public sector pay rise in quite some time, which is probably the case, but that is largely due to the fact that most have had their salaries frozen or pegged below inflation as a result of the austerity measures. Remember that austerity was brought in to reduce the amount of overspending (spending exceeds income) each year.

Anyway, whatever your political persuasion, finally around a million people will be taking home a larger salary… or will they? Well most probably will. However some higher earners are more likely to be exposed to the problems of the annual allowance. This is now about pensions, but directly impacts income.

Since the start of the 2016/17 tax year, the annual allowance has become more complex. Those earning over £150,000 in all forms of income (rent, earnings, savings interest etc) have a reduced annual allowance (the amount that they can put into a pension). The standard annual allowance is now £40,000 but this is “tapered” down to just £10,000 at a rate of £1 for every £2  over £150,000. There will be some, perhaps many that say, something to the effect “you have lots of money, so what if you cannot pay more into your pension”.

NHS Pension, Teachers Pension and similar..

These big State pensions were (and still are) brilliant for most people. You get a guaranteed income for life, that rises broadly in-line with inflation. Its based as a proportion of how long you are an employee and member of the pension and your final salary. The original NHS pension was a 1/80th scheme. You work say 36 years (24 to age 60) and suppose you are a top of your game NHS Consultant, earning around £120,000 from work with the NHS, then you would expect 36/80 (45%) of your final salary (hence the term) for life. That’s £54,000 a year in this example.

However, all these schemes became too expensive, successive Governments mucked up the calculations, getting members to contribute more to the pension and also changing the terms. Moving the goalpost further to 65 and then later to the State Pension Age (SPA). They also changed the rate at which the pension builds up from 1/80 and removed the lump sum as standard.

So what?

Well, if you are a high earner or have other sources of income that push you over £150,000 you start to have a reduced annual allowance. As no Government in recent history has been truly keen on simplicity or transparency, matters get complicated. So despite the term “annual allowance” this only applies to investment based pensions, not Final Salary (sometimes called Defined Benefit) pensions. No. These have a different sum. I won’t go into great detail, but in essence, the calculation looks at how much your pension has increased by over the course of the tax year. So just suppose you are in the old NHS scheme still (if over 50 that is entirely possible). You earn say £110,000 from the NHS and have Private Practice which adds considerably more. Your pension increased by 1/80th or £1,375. The way you work out your annual allowance “value” is this figure x16 and then add the increase in the lump sum value. So that makes £26,125.

OK, it isn’t quite this simple – you actually calculate the opening and closing values of your total pension, make an allowance for the Government approved rate of inflation, subtract one from the other and hey presto, there is your “pension growth”. So now that you have a pay rise half way through the tax year (October)… your final salary will be higher on 5th April, so will the sums.

Exceeding the Annual Allowance?

Well, if you do, you can use up any unused allowances from the 3 prior tax years. If not, any amount above your tapered annual allowance, or even standard one, will be taxed at your highest rate of tax. So you pay tax on money you have not had… quite a lot. This has got more financially engaged Consultants wondering if they should stay in the scheme at all. Kerboom…

Oh and just for good measure, you are responsible for reporting your excess to HMRC under self assessment rules. Naturally this really requires lots of advice and this is one area where data is needed. So all those payslips you’ve been keeping are needed. All the Total Rewards Statements (NHS) are needed and to keep the theme going, if you are in the NHS, you really ought to request a Pension Annual Savings Statement (PASS)… which you will need every year going forwards, or until the rules change.

So yes, you have a pay rise….

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Email me to get in touch
Public Sector Pay Rise2018-07-24T16:46:11+01:00

Retiring Doctors and GPs?

Solomons-financial-advisor-wimbledon-blogger

Retiring Doctors and GPs?

Lately I have found myself between a rock and a hard place when advising my medical clients. Through no fault of their own, many long-serving Consultants are being punished due to poorly thought through rules about the Lifetime Allowance and Annual Allowance. Whilst on the one hand they are “lucky” to have large pension funds, that are by comparison “brilliant” the fault of successive Governments to fail to do their sums is hardly their fault. Indeed if ever there was an appropriate use of the term “moving the goalposts” it is surely fitting for what has happened to public sector pensions, particularly the NHS Pension Scheme, which was revised in 2008 and has now morphed into the 2015 Scheme (from the start of this month).

The changes have meant that members have to guess when they might best retire… in some specialities that is “a challenge”, most have to pay more, work longer and accrue less, whilst, (if reports are to be believed) having to cope with a greater workload, politically motivated “targets” and an under resourced organisation.

As a result of blown 2012 Fixed Protection and further reductions to the Lifetime Allowance, many of those that I work with are somewhat fed up with the powerlessness that they feel in relation to their pension rights. I cannot speak of widespread disatisfaction, but certainly those that I know within the medical community (quite a number) are “cheesed off”. The way benefits are calculated are ludicrously complicated and often mean that extra taxes are payable – through no fault of the doctor – simply by being in the scheme and having an increase in pay which is out of sync with the defined limits. I’m not talking small taxes here – but excess amounts that are deemed to have been paid as income, even though this is not the case in reality (it isn’t paid as income)…

According to the BMA, a poll of over 15,000 GP’s indicated that 34% of them expected to retire within the next 5 years. Statistics out of context can be used to support any argument, so a headline such as this one needs some unpicking.HSCIS report2015

According to the GMC, there are about 60,000 licensed doctors on the GP Register for the whole of the UK. The GP register has been around since 2006 and requires that all practicing GPs keep their license and records up to date. This figure is for the whole of the UK and does include some possible double-counting as some specialists are GPs and vice versa. In England there are 40,584 GPs and according to data published last month by the Health and Social Care Information Centre (HSCIC), for the first time there are now more practicing female GPs (20,435) than male GPs (19,801). In any event, a suvery of 15,000 is therefore a survey of about 37% of the entire workforce by headcount… which is a significant survey, one might say a very solid survey, certainly when considered as a percentage of the relevant population – unlike the current political polls or those TV adverts for women’s products that claim high rates of satisfaction (so small that it is questionable if the people conducting the survey actually left their office building)… so this survey, unlike some, is rather “worth it”. Of course, not all GPs work full-time, the figures are a headcount, not a precise allocation of full-time GPs, the full-time equivalent number of GPs is 36,920. If trainees and retainers are excluded, then the full-time equivalent is 32,628.

By way of “hard facts” here are some NHS statistics to consider, I have taken these from the HSCIC report, which frankly could make the statistics much clearer… anyway…

1,387,692 Total NHS workforce (1,187,606 FTE)

of which

701,872 are professionally qualified clinical staff (623,050 FTE)… 50.5%

42,733 Consultants (40,443 FTE)…. 3.0% of NHS staff

55,079 Hospital Doctors (53,786 FTE)…. 3.9% of NHS staff

37,078 Managers (35,164 FTE)….2.6%

36,920 General Practitioners (32,628 FTE)… 2.6%

377,191 Nurses, including GP nurses (328,577 FTE)….27.1%

The problems of staffing within GP surgeries looks set to continue and frankly, if politicians contrinue to play havoc with the pensions (Lifetime Allowance and Annual Allowance nonsense) of doctors and nurses, they may well also be considering earlier retirement. Future PM, you have been warned…

Dominic Thomas

Retiring Doctors and GPs?2017-01-06T14:39:29+00:00
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