“Aged 57 and desperately run down, he looked like he was grimly contemplating three more years of work as a partner in a large practice. At 60 he would retire and take his NHS pension.
“But then an hour later he left with a spring in his step. I was able to give him hope.”
Rarely has a visit to a financial adviser reinvigorated someone in such a way.
And the adviser was not showing off. All he was doing was highlighting our barmy pension rules.
GPs are quitting the NHS in droves – with the average retirement age now 58 – and the trigger that is finally forcing them to quit is the annual allowance.
Once we are out of this Brexit impasse we must address pension taxation urgently. The lifetime allowance has to be first on the agenda.In total, almost 4,000 GPs retired before the age of 60 in the past six years. Financial advisers claim there is a six month delay in processing early retirement applications, so great is the current demand.
GP numbers have fallen by 1,000 since a government pledge to recruit 5,000 four years ago, and doctors complain that they are overworked, coping with an older, sicker population.
The crazy annual allowance taper at £150,000, combined with the lifetime allowance of £1.03m, mean many GPs are now better off retiring than they are working.
As the ever-brilliant Gary Smith, chartered financial planner at Tilney, explained to me: retiring means that they not only save on national insurance, but also their 14 per cent pension contributions. No more contributions also means no more tax charges on busting the allowances.
They can then work a couple of days a week, and even though their total income has fallen, their take home can actually rise.
It is forcing consultants into retirement too.
And I have heard stories of younger doctors leaving the NHS pension scheme for three or four years in a row in order to avoid the tax charges – a crackers decision because it also deprives them of vital death benefits.
The heath secretary has raised it with the Treasury. But what is Philip Hammond to do?
GPs should be careful what they wish for. Of course one of the reasons they bust the allowance is because their pension remains so fabulous.
But at least their plight highlights the huge impact that the caps are having on the proper functioning of our economy.
Once we are out of this Brexit impasse we must address pension taxation urgently. The lifetime allowance has to be first on the agenda. It is a penalty on prudence and personal responsibility.
The message should be: save in to a pension, and if you make millions, then well done and have a happy retirement.
Conflicting interests
The Investment Association is clearly trying to show it is doing the right thing on fees and charges.
Disclosure and transparency keep rearing their head, but that we do not have any clarity on fees after all these years of debate shows what a complex issue it is.
Just look at the IA website. Its section on costs and charges is clearly there to set out what action it thinks it has achieved – but actually all it does is highlight the muddle that exists: their rules on standard templates for defined contribution pensions, the code of transparency for local government pension schemes, Mifid II, the Packaged Retail and Insurance-based Investment Products regulation, key information documents, the Financial Conduct Authority’s market study and the cost transparency initiative.
All investors really want is to have a clear tariff of comparable charges before they invest, and then a pounds and pence costing of their total fees at the end of the year.
The problem is regulators and trade bodies have gone so far off the beaten track as they tried to fight through a jungle of conflicting interests, that they cannot find the way back.
Lifetime allowance
Heart-warming personal finance story of the week in the Sunday Times (obviously): the grandad who gave his grandson a pension for his 18th birthday party – a pension he had saved £240 a month in to since his grandson’s birth and was now worth £118,000.
The grandson will be slightly bemused to find this amazing gift might stop him from ever saving in to a pension again. He barely needs to touch it and he will bust the lifetime allowance before he retires.
James Coney is money editor of the Sunday Times
