Rules on retirement allowances were introduced in 2006 with the aim of preventing the wealthy from taking advantage of excessive tax breaks for pensions. The current annual limit is £ 40,000, but there are declining annual allowance rules that can come into play and new research shows doctors are facing operational issues.

Errors on declarations

Linda Wallace, director of Wesleyan Financial Services, the mutual fund specializing in financial services for physicians, warned advisers were noticing troubling issues.

“Over the past few days our financial advisers have seen a number of clients worrying about errors on their annual NHS retirement savings statements,” she said.

“These letters are being sent to members of the NHS pension scheme if their pension growth exceeded the annual allowance limit in the 2020/21 tax year.

“Although reporting errors naturally occur, we are getting more requests for help than usual in this area. “

For those affected by this, Ms Wallace urged urgent action.

Ms Wallace continued, “It can be a bit shocking and in some cases painful to receive a return unexpectedly or face a much larger tax bill than you expect. If you have received a pension savings statement and believe it might be incorrect, it is important that you seek advice and confirm the details.

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“A financial advisor who understands the NHS pension scheme can help you assess where there might be problems with your records, while the NHS Business Services Authority will be on hand to help you with any issues.

“It’s important to note that some doctors will receive a statement they didn’t expect, and the details will be correct – for example, some clinicians will have received salary increases over the past year that have spurred the growth of their pension beyond the annual allowance limit. , and they will now have to pay taxes.

“In these cases, seeking advice from a financial advisor will again be essential. They will be able to help you understand the implications for your pension and advise you on how to manage your liability for annual benefits to the pension fund. to come up. “

Ms Wallace gave an overview of how these issues might be dealt with in practice. “The types of errors are varied,” she said.

“For example, the full-time equivalent salary of one of our clients was incorrectly recorded at over £ 130,000, when in fact their actual full-time salary was around £ 92,000 – which caused them ultimately gave an incorrect pension entry of £ 140,000 for one of the schemes they were a member of and pushed them well above the annual allowance threshold Another had their pension entry listed at over £ 300,000 – far from the actual amount. “

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Income tax changes

In addition to these problems, changing income tax rules could affect general practitioners from 2022. The government aims to simplify the income tax system and accountants have warned that general practitioners could as a result be faced with higher bills. Unfortunately, some experts expect GPs to abandon their pension plans altogether.

At the end of August, said that according to government plans, all businesses, including GP partnerships, would be taxed on profits generated in an upcoming fiscal year. It’s different from how businesses are taxed now and the state has confirmed it will view 2022/23 as a “year of transition.”

As a result of these changes, companies could earn above-normal profits, which would increase tax liabilities. Individual GPs can also face considerably high tax bills during this transitional year, with surprisingly high pensionable income impacting their retirement planning.

Responding to these changes, Graham Leyfield, national account manager at Wesleyan Group, explained how GPs will struggle to move forward.

“The measures under consultation could mean that GPs face higher taxes,” he said.

“While this may just be a one-time hit, it’s important that GPs and GP partners have a plan in place for how they’re going to foot the bill.

“Often, tax changes have broader ramifications, and in this case, a year with an increase in income could see some physicians trigger the declining annual allowance, which reduces the amount of money they can save in their care. pension in a tax efficient manner.

“This, coupled with the fact that GPs potentially have higher pensionable income and therefore higher pension contributions, puts clinicians at increased risk of facing significant tax burdens just to save in their pension.” . To avoid this we could see some doctors withdrawing from the NHS pension scheme – a move which could negatively impact their retirement plans. For anyone considering this course of action, it will be essential that they seek professional advice.

“More generally, we fear that the threat of tax burdens will accelerate the choice of existing partners to leave or simply dissuade doctors from occupying general practitioner positions.

“The general practitioner sector is already facing an imminent staffing crisis and the general practitioner partnership model is showing signs of tension. Measures like these could only exacerbate these problems.

“The end of the fiscal year also coincides with when physicians are due to complete their quality and outcome framework assessments. The proposed measures could pile more paperwork on their desks when they need it least. “

Additional transparency

In the future, it looks like the focus will be more on doctors and their income levels. New regulations have been implemented which will require GPs and cabinet employees with more than £ 150,000 in NHS income in the 2019/20 fiscal year to report their income by November 12.

The guidance, released on October 5, confirms that this information will be made public before the end of the year.

The intention of these changes is, among other things, to “preserve public confidence” in the GP partnership model.

The general practitioners concerned will have to report this information themselves via the NHS digital strategic data collection service.