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Doctors’ pensions: What are the solutions?

Doctors’ pensions: What are the solutions?

While the government's increase of the tapered annual allowances thresholds helped deal with some of the issues doctors faced, there are still many which are unresolved, according to FTAdviser’s latest podcast guests.

Appearing on a special edition of the FTAdviser podcast, chair of the BMA's Pensions and Consultants committees, Vishal Sharma, said raising the taper thresholds helped that part of the issue but he said there was more to do.

He said: “This isn't just doctors who are saying this is wrong. There are financial services professionals, who have looked at the regulations and said this is morally unfair. 

“There's been support from the Association of Independent Specialist Medical Accountants who have looked at this issue and said it's not just the annual allowance taper. There are all these other issues such as the CPI disconnect.”

Currently, the annual allowance is £40,000 for most people but higher earners also have to consider the tapered annual allowance, which further limits the amount of tax relief they can claim on their pension savings by slashing their annual allowance to as low as £4,000 in some cases.

But in 2020-21 there were substantial increases in the income thresholds. That meant the tapered annual allowance now affects far fewer clients.

The limits are:

  • amounts over £200,000 for threshold income, and 
  • amounts over £240,000 for adjusted income. 

Also appearing on the podcast, Graham Crossley, NHS pension specialist advisor at Quilter, agreed lifting these thresholds did address some of the issue but this was only part of the problem. 

Crossley said: “The tax just doesn't work in this sort of scheme. We've been through an incredibly difficult period over the last two years in the health service, but despite this people have been working. 

“Despite all of the pressures, most people actually love their job, but no matter how much you love your job, it's really hard to expect people to actually earn less by working more, or having a pension that's lower value by working more, or delaying retirement, it just doesn't make any sense.”

Sharma added: “The issue is that really in certain circumstances the pension scheme means that you actually either pay more tax, or get a lower pension, if you do more work, and that's not what they're designed to do.”

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amy.austin@ft.com