Can we talk about Drs Pensions for a bit
Discussion
So it seems the lifetime allowance LTA reductions over the years - to reduce the £32billion pension tax rebate has resulted in Drs (earning over £150k) to have the punitive tax of 70% as such many are retiring early or refusing to do the overtime which will help reduce waiting times in A&E / operations.
To address it apparently options include getting the employees pension contribution paid as salary instead or maybe even removing them from the LTA cap.
On the same day dentists policemen teachers and other civil servants have all flagged um were in the same boat and we’d like not to be discriminated against.
So it looks like they are looking at public sector ...
Well hold on private sector has the exact same issue
Let’s not forget we’re talking about good earners £150k+ so give any movement to them “tax breaks for the roch” do. I thing “liking the NHS those hard working Drs”.
Another solution being discussed is to change the pension tax rebate from marginal rate to a flat system ie 30% for all which will help the lowest earners who arguably need pension the most. But doing that will hammer the middle earners who currently get the 40% and the highest earners would also benefit as no LTA /tapered.
Personally I’ve never worked in a role where overtime or bonus is pensionable so am at a loss why Drs who do overtime are caught in this loophole - they should simply get overtime pay which is taxed.
Discuss - how is this political hot potato resolved?
To address it apparently options include getting the employees pension contribution paid as salary instead or maybe even removing them from the LTA cap.
On the same day dentists policemen teachers and other civil servants have all flagged um were in the same boat and we’d like not to be discriminated against.
So it looks like they are looking at public sector ...
Well hold on private sector has the exact same issue
Let’s not forget we’re talking about good earners £150k+ so give any movement to them “tax breaks for the roch” do. I thing “liking the NHS those hard working Drs”.
Another solution being discussed is to change the pension tax rebate from marginal rate to a flat system ie 30% for all which will help the lowest earners who arguably need pension the most. But doing that will hammer the middle earners who currently get the 40% and the highest earners would also benefit as no LTA /tapered.
Personally I’ve never worked in a role where overtime or bonus is pensionable so am at a loss why Drs who do overtime are caught in this loophole - they should simply get overtime pay which is taxed.
Discuss - how is this political hot potato resolved?
The overtime is not pensionable.
The issue is that the NHS pension scheme is inflexible, and membership requires large mandatory contributions, which for older consultants will approach the maximum annual allowance anyway.
The second issue is that the NHS is utterly dependent on additional work from consultants, with consultants being asked to commit to regularly provide 8-12 hours per week, which will result in them hitting the taper.
The inflexibility of the pension scheme, and way in which income and contributions are calculated and taxed, tends to mean that consultants start getting hit at a taxable salary of about £120k - whereas in private sector schemes, the effect of the marginal rate could be mitigated by reducing pension contributions.
This has become a political issue because the NHS is dependent on overtime, and demand for overtime exceeds the supply of labour already. Additionally, a significant supply of overtime comes from older consultants nearing retirement, who are looking to feather their nest a bit, and have more free time after children have left home, etc.; exactly the sort of people hit hardest by this combination of factors. This has resulted in an abrupt change in the resource balance of the system.
There are futher contributions which are pensionable pay rises (e.g. promotion to executive management, performance related pay rises, etc.) which trigger pension revaluations - which for an experienced consultant with large final salary pension, can result in very large lump tax bills (up to 3x the annual salary increment - e.g. a £3k pay award may result in a £8k tax bill).
The issue is that the NHS pension scheme is inflexible, and membership requires large mandatory contributions, which for older consultants will approach the maximum annual allowance anyway.
The second issue is that the NHS is utterly dependent on additional work from consultants, with consultants being asked to commit to regularly provide 8-12 hours per week, which will result in them hitting the taper.
The inflexibility of the pension scheme, and way in which income and contributions are calculated and taxed, tends to mean that consultants start getting hit at a taxable salary of about £120k - whereas in private sector schemes, the effect of the marginal rate could be mitigated by reducing pension contributions.
This has become a political issue because the NHS is dependent on overtime, and demand for overtime exceeds the supply of labour already. Additionally, a significant supply of overtime comes from older consultants nearing retirement, who are looking to feather their nest a bit, and have more free time after children have left home, etc.; exactly the sort of people hit hardest by this combination of factors. This has resulted in an abrupt change in the resource balance of the system.
There are futher contributions which are pensionable pay rises (e.g. promotion to executive management, performance related pay rises, etc.) which trigger pension revaluations - which for an experienced consultant with large final salary pension, can result in very large lump tax bills (up to 3x the annual salary increment - e.g. a £3k pay award may result in a £8k tax bill).
WatchfulEye said:
The second issue is that the NHS is utterly dependent on additional work from consultants, with consultants being asked to commit to regularly provide 8-12 hours per week, which will result in them hitting the taper..
Is this genuine additional work or are they actually only doing 8-12 hours NHS work a week and doing private work the rest of the week? konark said:
Can we talk now, or do I need an appointment, sometime at the end of the month?
Title of the thread m8te. People do
Can we talk about
Germany
Syria
Trump
Italy
Etc
“For a bit”.
If you’ve not seen them just a quick search will let you catch up.
I think it’s a play on a ch4 comedy show from many years ago some wide boy/del boy type character
It would be interesting to understand what the value of the additional pension is that triggers the £8K bill in the above example. To put that another way, is the increased pension more than worth the immediate tax bill, and it's just the short term tax liability the recipient is worried about, while ignoring the long term benefit of the pension increase?
Welshbeef said:
konark said:
Can we talk now, or do I need an appointment, sometime at the end of the month?
Title of the thread m8te. People do
Can we talk about
Germany
Syria
Trump
Italy
Etc
“For a bit”.
If you’ve not seen them just a quick search will let you catch up.
I think it’s a play on a ch4 comedy show from many years ago some wide boy/del boy type character
Many private sector organisations have had a solution to this for sometime and allow affected employees to choose salary rather than pension contributions. There’s a bit more flexibility in private sector since now most are DC schemes however same principle can apply to DB. I believe this is what is proposed for the public sector. The only question in my mind is why on earth we got to this ludicrous position with pensions in the first place (especially with annual contribution limit tapering down to 10k) and why it’s taken the public sector so long to adopt the obvious solution.
9xxNick said:
It would be interesting to understand what the value of the additional pension is that triggers the £8K bill in the above example. To put that another way, is the increased pension more than worth the immediate tax bill, and it's just the short term tax liability the recipient is worried about, while ignoring the long term benefit of the pension increase?
It’s difficult to say what the value of the pension would be but the point is it’s taxed on the way into the scheme and the way out. So, using a DC scheme as an example (they’re simpler), if someone exceeds their annual contribution limit they get bill at the end of the tax year for the tax on the excess this could be at 45% for a top rate tax payer (you can ask for this to be paid from the pension scheme), however in later years when they draw the pension that’s still subject to tax, let’s say your pension takes you into the 40% band then you’ve effectively paid 85% tax on that money. So yes there might be some upside in the pension pot but it’s a pretty tax inefficient way of saving given if it were paid to you as salary would be taxed just once at 45% in my example. Added to which I think many senior doctors are in the earnings range of 100k to 125k over which the personal allowance tapers out giving big effective marginal tax rates before we even get to pensions issues.
All in high earners tax and pensions are a bit balmy at the moment in my view. The relatively low annual contribution limit (down as far as 10k) means for many high earners retirement planning is now mainly outside of traditional pensions. However it’s a brave government that will side with the wealthy and tackle this...
brickwall said:
WatchfulEye is spot on. Overtime was getting taxed at 70%+ marginal tax rate, so (funnily enough) people were declining the opportunity to do overtime.
Doctors were close to the various limits and thresholds, so incremental earnings would attract a tax liability as normal (which might be 62% between £100k and £125k), AND lead to tapering of pension allowances - creating a tax liability on some of them too.
In the private sector you'd mitigate this by adjusting down pension contributions, and say "take it as salary" (which of course would also create a tax liability, but without the same punitive marginal rates). But the NHS scheme is inflexible, so this wasn't possible.
The government's proposed solution is essentially to create that flexibility - allowing doctors to taper down their pension contributions and take the money as salary instead. It's not a bad solution.
£100-125k is a kicker it makes no sense why this is selected as the starting point and never increased with inflation. Doctors were close to the various limits and thresholds, so incremental earnings would attract a tax liability as normal (which might be 62% between £100k and £125k), AND lead to tapering of pension allowances - creating a tax liability on some of them too.
In the private sector you'd mitigate this by adjusting down pension contributions, and say "take it as salary" (which of course would also create a tax liability, but without the same punitive marginal rates). But the NHS scheme is inflexible, so this wasn't possible.
The government's proposed solution is essentially to create that flexibility - allowing doctors to taper down their pension contributions and take the money as salary instead. It's not a bad solution.
Welshbeef said:
brickwall said:
WatchfulEye is spot on. Overtime was getting taxed at 70%+ marginal tax rate, so (funnily enough) people were declining the opportunity to do overtime.
Doctors were close to the various limits and thresholds, so incremental earnings would attract a tax liability as normal (which might be 62% between £100k and £125k), AND lead to tapering of pension allowances - creating a tax liability on some of them too.
In the private sector you'd mitigate this by adjusting down pension contributions, and say "take it as salary" (which of course would also create a tax liability, but without the same punitive marginal rates). But the NHS scheme is inflexible, so this wasn't possible.
The government's proposed solution is essentially to create that flexibility - allowing doctors to taper down their pension contributions and take the money as salary instead. It's not a bad solution.
£100-125k is a kicker it makes no sense why this is selected as the starting point and never increased with inflation. Doctors were close to the various limits and thresholds, so incremental earnings would attract a tax liability as normal (which might be 62% between £100k and £125k), AND lead to tapering of pension allowances - creating a tax liability on some of them too.
In the private sector you'd mitigate this by adjusting down pension contributions, and say "take it as salary" (which of course would also create a tax liability, but without the same punitive marginal rates). But the NHS scheme is inflexible, so this wasn't possible.
The government's proposed solution is essentially to create that flexibility - allowing doctors to taper down their pension contributions and take the money as salary instead. It's not a bad solution.
Airline pilots who were lucky enough to hang onto final salary based pensions (now closed in my case) have had exactly the same issues, I spoke to my local MP about this a few years ago and she suggested at the time that our only hope of it being made fairer as high earning professionals was if it affected the NHS or civil service!
I’m expecting some kind of NHS only fudge though....
I’m expecting some kind of NHS only fudge though....
djohnson said:
Jeffbrfly said:
Didn't realise drs earn over 150k! Gosh!
Consultants sure do and a lot more when you add NHS salary and private work. NoddyonNitrous said:
djohnson said:
Jeffbrfly said:
Didn't realise drs earn over 150k! Gosh!
Consultants sure do and a lot more when you add NHS salary and private work. Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff