The NHS pension pot: GP Pensions
By way of clarification, here are some pointers focused on GPs for GPs and practice managers to be aware of.
1995/2008 NHS Pension scgeme for GPs irrespective of whether we are talking about a self-employed partner or a salaried GP, both are in the same section of the pension scheme.
The pension is based upon career average earnings, which are dynamised inline with inflation plus 1.5% each year so they keep their value in real terms. The standard pension is 1.4% of your pot and the lump sum is three times.
GPs should get a pension estimate with a complete service history and the dynamising sheet to check the earnings are correct. (We can arrange and faciliate this for you) If they are paying into added years then this is also needed.
The next step is to work out where GPs and other qualifying staff are with regards to Lifetime Allowance (LTA) and the Annual Allowance (AA).
This is the maximum amount of money that you can have in your fund before the Government starts applying penal tax charges. The limit was £1.8 million and it went down further to £1 million in April 2016.
Under the 1995 scheme if the accrued pension is greater than £43,478 then it will be affected. The effective tax charge is 55% if you break the limit. If you were above £1.25 million as at the 6 April 2014 then you can protect yourself by applying for Individual Protection 2014 up to a maximum value of £1.5 million.
You have until 5 April 2017 to apply. If you were below £1.25 million then, but you are currently above £1 million, then you can apply for Individual Protection 2016.
Annual Allowance (AA)
This is the amount of money you are allowed to save towards your pension each year before the government penalise you for saving too much.
As most GPs are self-employed and you don't know their earnings, then how do you know where they are.
The AA is currently £40,000 and now for some good news and not so good news. There have been changes to the way the AA has been calculated and for most GPs for the tax year 2015/16 they will not have a significant AA problem.
This all changes however for the tax year 2016/17 and for what the government deem as high earners they are going to restrict tax relief.
A high earner in this context is someone who has accessible income of more than £150,000. If there us a threshold income of less than £100,000 they keep the £40,000 AA limit but others could see their cut to £10,000.
This is a highly complex subject and before taking any decisions, seek suitably qualified advice from specialist medical indepedent advisers fully authorsed by the Financial Conduct Authority.
The quality of advice available nationally is questionable and we would urge you to do your homework and ensure your adviser is a qualified specialist.
If you wish to discuss your NHS Pension with independent financial adviser Kevin Walker or a member of his team, call 0191 653 1022 for a free initial consultation.
Blackett Walker is authorised & regulated by the Financial Conduct Authority.