Planning your NHS Pension
As the tapered annual allowance is introduced, it’s now increasingly likely that a greater number of GPs will exceed their pension annual allowance. If you're affected, this means you will have to pay more tax in coming years.
It may now be time to review your options and optimise your position.
What’s happened so far
Annual allowance calculations for GPs look at the increase in the value of the pension from the start of the tax year until the end. Then, the result is multiplied by a factor (19 if in 1995 scheme and 16 if in 2015 scheme) and gives the pension input amount which is compared to the annual allowance.
Since April 2016, the annual allowance starts at £40,000, but this can be tapered down to a minimum of £10,000 depending on the level of earnings of the individual.
The most important figure for GPs is the threshold income of £110,000. This includes income from all sources, minus superannuation contributions paid, and this is the point where the annual allowance starts to be reduced. If the threshold income is below £110,000 then the full annual allowance is available.
How we can help
1. A Tax Only Report
One of the first things we can do is prepare a report based on historic data that’ll look at your position solely from a tax perspective. What this will do is take the most recent year’s data and restate this as if different decisions had been taken in that year. So, for example , this could be a reduction in sessions or opting out of the pension scheme for a period in the year.
| Estimated: | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 |
| Continued membership | Stop salaried OOH work | Opt-out for 6 months | Reduce your sessions to 7 | |
| Number of sessions worked | 8 | 8 | 8 | 7 |
| Gross annual income in the tax year | £163,000 | £154,500 | £163,000 | £147,500 |
| Tax | £47,434 | £43,084 | £54,265 | £40,042 |
| Superannuation payment | £42,952 | £40,436 | £20,503 | £35,723 |
| Net income in the tax year | £66,379 | £67,449 | £88,232 | £67,918 |
| Estimated AA charge | £6,235 | £3,531 | £Nil | £1,268 |
It’s important to know that this wouldn’t look at your future position but would provide you with information for last year based on various scenarios. It also wouldn’t factor in the impact of any decision on your future pension position – it’s prepared purely for tax purposes, and we strongly recommend you seek financial advice before making any decisions.
2. A Full Tax and Pension Report
Another option is to meet with one of our independent financial advisors who will provide you with estimates of your future tax and pension positions.
Similar to the Tax Only Report, we look at your tax position in different scenarios and also predict forward to your retirement age providing an estimate of your future pension position.
| Estimated: | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 |
| Continued membership | Stop salaried OOH work | Opt-out for 6 months each year | Reduce your sessions to 7 | |
| Number of sessions worked | 8 | 8 | 8 | 7 |
| Gross annual income in the 2018/2019 tax year | £163,000 | £154,500 | £163,000 | £147,500 |
| Tax in the 2018/2019 tax year | £47,434 | £43,084 | £54,265 | £40,042 |
| Superannuation payment in 2018/19 tax year | £42,952 | £40,436 | £20,503 | £35,723 |
| Net income in the 2018/19 tax year | £66,379 | £67,449 | £88,232 | £67,918 |
| Total AA charges to 2023/24 |
£91,405 | £74,826 | £23,521 | £60,922 |
| Net NHS Scheme pension entitlement in the 2023/24 tax year | £49,925 | £49,518 | £37,694 | £49,168 |
What to do Next
Our reports produce valuable information that can be used to base key retirement decisions and are unique to the individual, this means the right solution for one GP won’t necessarily be for another. We tailor our advice to each individual and have expert on hand to help. Please get in touch today
Notes
- The above tables are merely for illustrative purposes and shouldn’t be used to make any financial decisions
- The figures used are based on historic inflation rates and tax legislation
- Each individual’s position will be different due to all of the factors affecting the calculations