Defined Benefit  

Doctors warned against leaving NHS pension scheme

Doctors warned against leaving NHS pension scheme

An independent financial advice firm has warned doctors not to leave their defined benefit (DB) pension scheme, saying it was concerned too many were exiting for tax reasons.

Chase de Vere Medical, which is part of Chase de Vere, said it had noted a "significant increase" in the number of doctors either stopping contributions into the NHS pension scheme or retiring early.

Doctors were leaving the scheme mainly due to tax charge concerns if they made excess contributions or if their pension assets became too large, the firm said.

It said the concerns had increased significantly since the introduction of the tapered annual allowance in 2016, which gradually reduces the allowance for those with adjusted income of more than £150,000, and can result in an annual tax charge on contributions and a lifetime allowance tax charge on benefits.

Andrea Sproates, head of Chase de Vere Medical, said: "Many doctors are choosing to stop paying into the NHS Pension Scheme when this is likely to be the wrong decision for them. 

"While they could face additional tax charges by staying in the scheme, if they leave they will miss out on valuable pension and ancillary benefits, which are likely to be much higher than the possible tax charges."

She added: "What’s even more worrying is that an increasing number of doctors are considering retiring early, in part because of these pension concerns. With the NHS under significant pressure, our health system can ill-afford to lose so much experience and expertise."

Chase de Vere Medical launched last month after Chase de Vere's acquisition of Medical Money Management, a company that specialises in providing financial advice to the medical and dental professions, last year.

Chase de Vere already has experience in providing advice to medical practitioners, having worked in partnership with the British Medical Association since 2005 and given advice to 12,000 of its members.

It emerged earlier this year the NHS Pension Scheme was one of a number of schemes that could be overpaying some of its members.

In 2016 discrepancies were uncovered between employers’ records and those held by HM Revenue & Customs, leading to suggestions that people may be given erroneous state pension payments.

FTAdviser reported in April that tens of thousands of public sector pensioners, who used the contracting out process, could face demands to give back part of their pension. 

Elizabeth Truss, chief secretary to HM Treasury, had said in a written answer to parliament that the decision whether and how overpayments are to be recovered belonged to each ministerial department responsible for the appropriate pension scheme, and should be determined in accordance with managing public money guidelines.

In May, the Liberal Democrat spokesman for work and pensions urged the departments not to recoup overpayments related to public sector workers.

Between 1978 and 1997, employers sponsoring defined benefit (DB) pension schemes could contract their employees out of the additional state pension, as long as the scheme paid a comparable guaranteed minimum pension (GMP).