Tax  

Annual allowance modeller for doctors launched

Annual allowance modeller for doctors launched

The British Medical Association has launched a tool which will allow consultants to calculate charges they may incur on their pension due to annual allowance rules.

Developed by Dr Tony Goldstone, a consultant radiologist, the BMA Goldstone Pensions Modeller – available to union members only – is designed to allow doctors to calculate any annual allowance charge that they may incur in future years, as well as scheme pays charges if they choose to use it.

Scheme pays allows savers to settle annual allowance tax charges of more than £2,000 through the pension fund without needing to find funds upfront.

However, individuals who use it will see their benefits adjusted at retirement and will pay interest on the 'loans'.

The BMA's tool also helps consultants determine how to move in and out of the pension scheme to maximise their pensions and how to minimise any annual allowance tax charges.

Concern about doctors' pensions has increased significantly since the introduction of the tapered annual allowance in 2016.

This gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

The tapered annual allowance means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

It emerged in December that the number of members leaving the NHS Pension Scheme was five times higher than that seen by other public pension funds, which could be a result of tax problems.

The modeller is available to consultants on the 1995 and 2015 NHS pensions schemes. It applies to doctors in England, Wales, Scotland and Northern Ireland.

For those in Scotland, there is slightly limited functionality around scheme pays which the BMA will be looking to develop in the near future, it stated.

According to Dr Rob Harwood, BMA consultants’ committee chair, the union has been warning the government over the last year of the perfect storm that was "forcing the most experienced doctors to retire, reduce their workload, abandon leadership positions and stop covering vacancies".

He added: "Hard-working consultants are being landed with huge and unexpected additional tax bills resulting from annual allowance charges on any pension growth they may have had.

"In some cases, this means doctors [are] paying to go to work."

Dr Harwood argued that while the BMA would continue to lobby the government for change, it was the union’s duty to provide practical support to members facing this problem.

He said: "The BMA Goldstone Pensions Modeller supports members to understand how damaging these regulations are and how the issue affects them individually.

"Crucially, it lets consultants make an informed decision on how to protect themselves against the charges by reducing the amount of work they do."

Last month, Health and Social Care secretary Matt Hancock announced that the government would consult on proposals to offer senior clinicians a new pensions option, which would allow them to build their NHS pension more gradually over their career without facing large tax charges.