TAPERED ANNUAL ALLOWANCE – NHS

TODAY’S BLOG

TAPERED ANNUAL ALLOWANCE – NHS

The Tapered Annual Allowance was introduced from 6 April 2016. It has caused considerable problems for members of the NHS pension scheme in terms of excess tax charges due to the formulas used in the calculations.

Admittedly having a good pension is a nice problem to have, but when faced with an excess of say £60,000 (by calculation) this generates a tax bill of typically £27,000. I have seen some that are much higher.

Therefore, many Consultants and senior NHS staff have really been forced to reduce their sessions (NHS pay) or take a break from or leave the pension scheme entirely – which is nuts. This is essentially a tax charge on money that has not yet been paid (it is paid at retirement).

After much badgering, a compromise has been reached for the current tax year 2019/20. In that a political promise has been made that the excess tax charge will permit the pension scheme to pay the charge and the employing NHS Trust will pay now compensate for this when the pension starts (my short version). This has now been confirmed for the English and Welsh NHS Pension Scheme.

NHS Annual Allowance 2019/20

Superficial Fix

There is as yet, nothing NEW stated about the 2020/21 tax year (there are restrospective juggling adjustments that can be made towards the end of the year, but these are daft) – but we do have a Budget coming in March, so we hope the ludicrous Tapered Annual Allowance will be scrapped then. However, this ought to apply to everyone, not simply NHS employees.

The Annual Allowance – Simplified, Quick Overview

In very simple terms the Annual Allowance is a maximum of £40,000. This is the total that can be paid into pensions by you and your employer. It reduces by £1 for every £2 of income over £150,000.  The allowance reduces to a minimum of £10,000 once an income of £210,000 is earned. In short, you can invest more into your ISA. However, for those in final salary schemes and the NHS in particular, the calculation is not really about how much is paid in, but how much the pension grows by and then multiplied by 16. So, if your pension increased by £1500 for the year that’s £24,000. Not the 14.5% of salary you must pay to be in the scheme. Its way more complex than this, but to save time, go with my summary.

It Is Political – Government and the NHS always are

In view of the impact that pension rules are having on senior NHS staff and their ability to work their normal hours, and with winter bringing the usual rise in demand for NHS services, NHS England and now NHS Wales and NHS Improvement have decided to take exceptional action. An extract from the announcement is given below:

‘This action will mean that:

·         Clinicians who are members of the NHS Pension Scheme and face a tax charge in respect of work undertaken this year (2019/20) as a result of breaching their annual pension allowance will be able to defer this charge (by choosing ‘Scheme Pays’ on their pension form) meaning that they don’t have to worry about paying the charge now out of their own pocket.

and:

·         The NHS employer will make a contractually binding commitment to pay them a corresponding amount on retirement, ensuring that they are fully compensated in retirement for the effect of the 2019/20 Scheme Pays deduction on their income from the NHS Pension Scheme in retirement.

Watch Out For…

Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension for 2019/20.

Local NHS employers are being asked to actively promote this development to affected staff as they plan for extra capacity and staffing over the winter period.’

This measure will only apply to the 2019/20 tax year as new flexibilities are being introduced from 2020/21.

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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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

TAPERED ANNUAL ALLOWANCE – NHS2023-12-01T12:17:03+00:00

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?2023-12-01T12:40:04+00:00

Public Sector Pensions – Goalposts Moving Again

2008: The Deal – Schachter
Public Service pension schemes are undergoing a huge amount of change at present. As you may know I advise many Consultant Doctors as well as quite a few people working within “public service”. Yesterday, the Government issued its Public Service Pensions Bill. This may seem like yet another cost cutting exercise, but I have serious concerns about it. In essence we all know that public service pensions are very good and most of us would be lucky to have one, however that does not mean that because we don’t, those that do need to be reprimanded, which is frankly what it looks like. There is a fundamental change to the way the schemes operate, switching from a final salary basis to a career average basis. This will almost certainly mean lower pensions for most members of the scheme. In addition the member contribution is also increasing signficantly, this is on the back of several “shake ups” previously.
Those within 10 years of retirement (generally aged 50+) will not be impacted by the new proposed rules. However everyone else is likely to pay more, get less and retire later. Not exactly a winning combination if you are trying to incentivise a workforce. I’m in the process of properly reading the Bill and will be outlining further thoughts in time. However, envy should have no part to play in policy making and I am concerned that this sort of goalpost moving is exactly the sort of ill conceived idea that makes normal, moderate people give up on the political classes, creating an unhealthy dynamic, which in a European context has resulted in some fairly dire consequences.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Public Sector Pensions – Goalposts Moving Again2023-12-01T12:22:48+00:00

Permission To Carry On Doctor

1967: Carry On Doctor – Thomas
Doctors have to be revalidated. In other words, they have to regain GMC approval to practice. This is a result of the Government’s decision to have a revalidation process beginning from the end of this year. I understand that the revalidation will need to be reviewed every five years, which whilst being an irritation to many already over-worked doctors, will be a relief that at least it will not be an annual process. A part of the RDR (Retail Distribution Review) is that advisers must effectively attain an annual Statement of Professional Standing certificate, provided by one of a few organisations licensed as a provider.
Doctors will get six months notice of their revalidation dates. The GMC have advised that revalidation dates for currently licensed doctors would likely be within the next three years to March 2016, with this possibly stretched over a five-year period for trainees.
Whilst there is clearly merit in ensuring that skills and competence is maintained and kept up to date, one does begin to wonder if we have simply created more form-filling and form vetting jobs without actually ensuring any significant improvements. This isn’t just an issue for doctors or financial advisers, similar principles are being adopted in many fields. I suspect that the cost of all this validation is fairly significant. I have tremendous respect for doctors, but I really don’t believe that revalidation will make any difference to the confidence I have in them and I imagine that my SPS will not provide greater confidence in me.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Permission To Carry On Doctor2023-12-01T12:22:32+00:00

Doctor, Doctor…I Feel Like the BMA Aren’t Listening

1939: The Return of Doctor X

There is more woe for doctors that are members of the BMA. The union organisation had a huge amount of support from its membership who voted overwhelmingly in favour of industrial action due to reforms of the NHS pension scheme. However, the BMA seem to have backed down and decided not to take any action. There are a considerable number of doctors who are now fairly fed up that not only did the BMA get a decisive “yes” in their online vote, but this was also approved at its Annual Representative Meeting. So many doctors are feeling as though they are not being listened to by either the BMA or the Government.

The NHS Pension Scheme is a really good final salary scheme, but it has undergone some serious changes, which mainly result in  increased costs for its members, particularly Consultants. There are many of us that are envious of having a scheme like the NHS, but changes to employment terms and conditions is no small matter and many Consultants are paying well over 10% of their income towards the NHS Pension scheme and many are paying 50% tax and some will even get additional tax charges for remaining in the pension, despite this being in their interests to do so. Advice to leave the NHS Pension scheme should be considered very carefully indeed.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Doctor, Doctor…I Feel Like the BMA Aren’t Listening2023-12-01T12:22:24+00:00

What Can Surgeons Teach IFAs?

1944: The Tree Surgeon – Gordon
You may be aware that, whilst I work with many people from different walks of life, I have advised Consultant Doctors for over 20 years. I was interested to read an article that outlined the problems that surgeons are currently having which resonate with independent financial advisers. It seems that surgeons are also in a bit of a battle to protect the use of a word that describes what they do. A surgeon is someone that has a medical Degree and has undergone postgraduate surgical training. Yet there are a variety of people that also use the term “surgeon” such as a podiatrist surgeon, who is unlikely to hold a medical Degree, but may have spent 12 years training in the surgical and no-surgical treatment of the foot.
What I had not realised was that at the moment, anyone can call themselves a surgeon but are not able to portray themselves as a registered medical practitioner. There was I worrying about how the term independent has been abused and from 2013 will be further confused. I have a great deal of sympathy for medical surgeons on this matter, but probably the ability to use a title to describe a skill is best clearly defined, with room for the term to be applied to other disciplines too, only a fool would want open heart surgery from a tree surgeon. In January financial advisers will be either independent or restricted. Sadly a Bank adviser can be a restricted adviser in the same way that a really good financial planner that does not arrange or advise on “unregulated collective investment schemes” will also be a restricted adviser, yet there is a huge difference between the two.
The power of words and their usage is always important, but as one very sensible commentator wrote, “This all demonstrates the importance of ‘language’ – and the correct use of words; so that people can understand one another, knowing what specific words actually mean. Sadly today, our press and politicians seem adopt the Humpty Dumpty attitude towards words: “When I use a word, it means what I chose it to mean”! But then are they in the business of portraying clarity or confusion?”
The law (and regulator) needs to be very clear about definitions and sadly this is not the case at present for either financial planners or surgeons. It also needs to be remembered that there are some that will always seek to exploit vagueness in terminology. An independent licensed credit broker, is able to offer loans and mortgages, but it does not mean that they are independent and able to offer mortgages from the entire (or whole) market. As ever, caveat emptor – even when you are going for surgery. For the record, from 2013 my firm will remain Independent.
 
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
What Can Surgeons Teach IFAs?2023-12-01T12:22:18+00:00

More Pain For Doctors – Breaking Trust

1963: Doctor in Distress – Thomas
As you may have gathered, I advise quite a number of medical professionals. I came across a concerning piece of news that was published in “Hospital Doctor” today. It seems that your pay is under threat from cash stretched hospital Trusts. The report suggests that this is being considered in some Surrey hospitals with potentially renegotiated terms for those earning over £55,000 – which is pretty much all senior doctors. The “cards on the table” negotiations also include changes to overtime, weekends and Bank Holidays as well as reductions in sick pay and annual leave entitlement. It would appear that the NHS continues to be a political punch bag and clearly there is increased concern about good Trust management following the first NHS Trust to be placed into administration (last week South London Healthcare Trust which is the old Princess Royal Orpington, Queen Mary’s Sidcup and Queen Elizabeth in Woolwich). It seems that having a Royal title will not save hospitals, who seem to be facing the equivalent prospect of the guillotine.
The Pay Review bodies are due to report to the Government this week on the impact of introducing regional pay rates after the public sector pay freeze, which is due to end in April. It needs to be said, that Doctors and Consultants in particular have been hit very hard by cuts and tax increases over the last three years. I imagine that many of you will be feeling rather “frustrated” at yet further meddling with a system that seems to have less to do with providing high quality medical care and more to do with budget manipulation by whoever is in office.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
More Pain For Doctors – Breaking Trust2023-12-01T12:22:17+00:00

Medical NHS Clients – Award Time

Whilst GP’s may be in the news for strikes over the NHS Pension changes, don’t forget that the NHS Leadership Recognition Awards are back. The 2012 nominations for the nine categories close on 29th June (just a week away). So get those nominations in and let me know if you get nominated. The nine categories are for Board, Community Leader, Innovator, Inspiration, Leader, Mentor, Newcomer, Partnership and finally Quality Champion. More information can be found at the dedicated website.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Medical NHS Clients – Award Time2023-12-01T12:22:03+00:00

NHS Pension Scheme Costs Increase

1963: Doctor in Distress – Thomas
As the end of the month approaches, many NHS employees will be reflecting on a fairly significant financial planning matter – in that your net pay will reduce due to the increases in pension payments towards the NHS Pension (which is excellent) which took effect from 1st April 2012. Contribution rates are based upon full-time salary levels and the larger increases impact those with higher NHS pensionable pay. Your pensionable pay does not include all of your income and it is best to review your March payslip (the end of the NHS financial year) where you will see a total pensionable pay figure for the year. This is the amount that your NHS Trust employer report to the NHS Pensions Agency at Hesketh House.
Anyway, for those earning £26,558 – £48,982 of pensionable pay, your payments will increase by 1.5% to a total of 8.0% of your pensionable pay each month. All those earning more that £48,983 have had their payments increase by 2.4% of salary. This means a total of 8.9% a month for those earning £43,983 to £69,931; 9.9% for those with pensionable incomes between £69,932 and £110,273 which will cover most senior staff. Those earning over £110,273 will now pay 10.9% this is generally Consultants and those with Merit Awards etc. The number crunchers estimate that 52% of NHS staff will pay more towards their pension, estimated to be approximately 682,500 people. You can see a table form of this by clicking this link.
It is important that you keep your payslips and P60’s safely, clients should send me a copy of their March 2012 payslip and ideally this should be sent as a pdf scan. This is vital information to enable us to calculate pension contributions for the annual allowance and lifetime allowance, which obviously helps us to do a thorough job in relation to your financial planning, and in particular your pension.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
NHS Pension Scheme Costs Increase2017-01-06T14:40:03+00:00

Critical Difference in Financial Protection

2011: The Good Doctor – Lance Daly
As Independent Financial Planners that protect our clients, it is important that there is a good understanding of the different types of financial protection. Those that cause the most confusion tend to be Income Protection (unhelpfully sometimes called Permanent Health Insurance – PHI) and Critical Illness Cover (CIC or sometimes called Serious Illness Cover).
In simple terms, Income Protection would provide you with a regular monthly income if you are unable to work due to a long-term or serious illness. It would pay this until you are better or you reach the policy end date (normally your retirement date) whichever is the soonest. It does not cover all of your income – as this might be a deterrent to attempting to return to work (perhaps the State system could learn from this). The benefits are paid directly to you personally if you took out the cover, if your employer did, then it pays the employer who then passes it on via payroll. Typically claims are due to back problems, long-term illness such as depression, ME and disability.
Critical Illness cover is completely different, it provides (generally) a one off lump sum of money. This can be used however you like. Some would use it to clear a mortgage or debts, thereby reducing financial pressure. It could be used for a variety of things – medical treatment, care, something you always wanted to do, providing income – whatever – it is up to you. The reason it pays out is because you have a serious illness – by which I mean something like cancer, heart attack or stroke. Life threatening.
The two types of cover might overlap – the thing about medics these days is that they are very good at their jobs and keep us alive, which is good surely… well of course, but being seriously ill and unable to work is not that great unless you have resources. This is where you either have insurance (as above) or you use your savings and investments to do the same job – we call this “self-insuring”. The problem with financial protection insurance is simply that you need it most when you can least afford it. Sad reality. I have never met someone that wanted to claim against a policy when taking one out – but its there if they need the cover. Of course how much cover is needed is a different discussion and something that needs to be thought through. After all, what would you do if you were told your spouse has cancer and 6 months to live? you may want to reflect on life, your values, commitments and your work.  This is also where our advice is invaluable.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Critical Difference in Financial Protection2017-01-06T14:40:09+00:00
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