Nosy NHS pensions question

[Jazz12]

Our friends are doctors. He is a GP and she is a hospital consultant. They are both 45. I always assumed they are on final salary pension. They say rules changed and they aren’t!
Are NHS doctors not on final salary pensions? Is that a thing of past??

www.nhsbsa.nhs.uk/nhs-pensions

Contact them.

Thanks.

Exactly this but unfortunately a lot of people think like @Notanotherone5 and can't see the impact, wonder how many people like this would want to pay to go to work themselves?

It's devastating sections of the NHS at the moment.

The 8a debacle is actually a common feature of pension schemes that have a higher rate of contributions as salary increases. Typically it is an impact for 12 months then the next years pay award sees your net pay back to what you were getting or more. The point is the pensions benefit is greater than the short term financial hit.

*It really, really is.

There needs to be a lot more education around the importance of saving for retirement and helping people recognise valuable schemes when they see them.*

It's all very well saying this, but when you've got people who are struggling to pay their mortgage now, struggling to heat their houses now, struggling to afford food now....can you blame them for prioritising now rather than 20-30 years in the future? I don't.

Typically it is an impact for 12 months then the next years pay award sees your net pay back to what you were getting or more. The point is the pensions benefit is greater than the short term financial hit.

You're working on the assumption that there is going to be a pay award mext year and that it will be big enough to make a difference. Short term financial hits are a fucking long time when you are living through it.

It's all very well saying this, but when you've got people who are struggling to pay their mortgage now, struggling to heat their houses now, struggling to afford food now....can you blame them for prioritising now rather than 20-30 years in the future?

I'm not blaming anyone, but there's little point in relying on a state pension that may not exist when they get to that stage.

At the stage of reaching retirement, if you've no income, I imagine higher regret levels among those who had access to a good scheme, compared to those who had nothing better than a crappy direct contribution option with minuscule return on investment.

There's little understanding out there as to the situations people will be facing on retirement and the options available.

Taking breaks from good schemes isn't the end of the world so long as you get back into them, but throwing one's hands up and saying there's no point isn't sensible.

@Notanotherone5 you are very much misunderstanding the issue, not sure if you're being purposely dense?

Doctors don't have a choice (unless they leave the scheme) to pay pension contributions on their salary even when they've reached their lifetime contributions limit.
They then get hugely takes on those contribution, from their take home salary. So they are paying tax on money they don't have access to for potentially many many year.
They therefore have to pay the tax bill out of their salary AFTER already having had it taxed.

• where do they then get the money for the tax bill that they need to pay now, not when they retire?
• why are they going to bother doing extra shifts that leads to the issue above therefore resulting in working more hours and paying for the privilege?

Diamond shoes? Really??

where do they then get the money for the tax bill that they need to pay now, not when they retire?

The NHS have a scheme which basically lets doctors borrow money for their pension tax from their pension.

So, say a consultant has a pension tax charge of £20k to pay. And like most people, they don’t have a spare £20k sitting there in their bank account.
They can apply to NHS pension scheme pays to pay this £20k for them. If that’s approved, then the pension tax charge is paid - but, when the consultant retires, that £20k plus interest is taken out of their pension pot.
And this can be repeated on subsequent years, providing that there’s sufficient funds in the consultants pension scheme to repay this loan, and the consultant applies by a deadline.

If the consultant is near retirement, then using scheme pays to pay pension tax charges might not have too much of an impact.

But if the consultant is in their 30’s / 40’s, with quite a time left before retirement, then that’s more of a worry, especially when the pension tax situation may happen again and again in future tax years. It’d be theoretically possible for a consultant to wipe out their entire pension pot by paying pension tax charges in this way.

Realistically, the only way for consultants to avoid pension tax charges is to limit their working hours, which creates problems with patient care.

He’s in both, but the goalposts keep moving. Either way we can’t risk the big tax bill.

That is utter madness, whoever put this in place is insane. What an absolute balls up.

The Life Time Allowance was introduced in 2006 by Tony Blair and Gordon Brown (Chancellor of the Exchequer). It was originally £1.5 m, it increased to £1.8m in 2011/2012 and then reduced to £1m in 2015/16 and has then slightly increased to £1,073,100 in 2020/21.

The Annual Allowance was introduced at the same time and was £215k. It increased to £255k in 2010/11 then reduced to £50k in 2011/12 and £40k in 2014/15 and has remained the same.

@unpocamasporfavor so it’s Tony Blair and Gordon Brown were insane for introducing it but the Coalition GMT (Conservative Liberal Democrat) were insane for reducing the thresholds. So take your pick 😂.

@Princessglittery wouldn't it make sense for there to be a way for doctors to remain in the scheme but stop paying contributions then?

That’s up to the scheme managers to decide.

MPs get a far better pension scheme & an expenses package only Elon can dream of....

So not that hard pressed to find... NHS staff also pay quite a bit in.. even my DD just started, is contributing 11%.... the deal being "have lower pay in return for a good pension"

Now its low pay and a worse pension.

MPs get a far better pension scheme & an expenses package only Elon can dream of

How many MPs are there? It's a minuscule percentage of the work force.

The vast, vast majority of workers can only dream of a pension as generous as the nhs. It's excellent by any objective standards. Your daughter should look into how much she would need to be saving to get an equivalent sum in a direct contribution scheme. That'll concentrate the mind.

My post tax/ni take home pay last year was 45K - not complaining it does for me.
However, my pension tax bill which I have no control over was £32K
Giving me a grand sum of 13k disposable income for the year - beyond shit.

Every extra clinic I do or list I do, after tax, ni leaves me paying the govt £80 to work.

I am reducing my hours and going part time, in a speciality with enormous waiting lists - it is utter madness but I can not continue to pay the govt to go to work and survive.
Two more years and I will retire - I am just tipping 50 - am at my most experienced, productive, useful for the patients but this is utter madness.

Scheme pays reduces my pension - so same whammy just delayed

No one gives a damn because allegedly I am a rich doctor!

I have never heard anyone say that doctors have good work-life balance. Surgeons especially. They work unbelievably hard. They are under huge pressure to publish academic papers alongside their clinical practice too. In the UK their NHS salary is a fraction of what they would earn overseas, but if they want to fit private practice in they have to take out expensive insurance and then squeeze that in around their NHS responsibilities.

@lookluv That is extraordinary. Is it because you have hit George Osborne's pension pot limit? It is such madness that I think you need to contact your MP. We shouldn't be losing 10 years of your expertise because of this nonsense. Nor should you be paying an effective tax rate of c.75%.

It's career average. You're docked maternity leave, sick leave, compassionate leave, carers leave, it's pro rata so if your part time you obs get less. You get your full pension when you reach state pension age. That's how it works for me as an auxiliary nurse.

It’s not just doctors who pay this tax. Anyone who earns well and saved for a pension is hit with it at the same rate. How does anyone pay it? My DH was self employed. He didn’t even have an employer making contributions! Doctors at least have that. They are no worse off than anyone else. They didn’t even have to pay into the fund by themselves!

It’s not obvious, OP, and that’s why financial advisers who specialise in NHS pensions are doing a roaring trade advising doctors on their pensions.

The doctors probably do earn well and have decent pensions compared to lots of people. But it is a highly pressurised vocation where people are exposed to a lot of trauma and high risk decision making. They are highly educated and have valuable skills.

However I expect your dr friends look at their peers, who will be highly motivated people and academic achievers. Many will have gone into other sectors and earn far far more. Think city bankers, city lawyers and ceos. Health doesn’t pay well in the uk because most of it is state controlled. Which is a good thing because health isn’t a commodity, it’s a resource.

Basically the doctors think they could have had an easier life and earned far more money in other sectors or profession.

Medicine is a vocation. You don’t go into it for the pension or the car.

Your current salary applies to your final salary years. It doesn't stick at your final salary when the scheme transitioned

That's missing the point. Pension tax is applied to everyone, but it uniquely impacts doctors (and a few other public service workers) because of some crucial small print details.

Imagine a situation where your official salary is £50k. But you'd actually get paid an effectively random amount anywhere between £0 and £50K. And you'd only find out what the actual salary was AFTER the year had finished.

That's what many doctors face. Every year. For the rest of their working lives.