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Why is there no action on killer pension tax issue?

10th Jul 2019
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Doctor and patient consulting on a table
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Philip Fisher examines the complex conjunction of pension and tax rules that have led doctors to work to rule this summer.

It is an unfortunate fact that over the years the British tax system will have led to the demise of a number of individuals.

In the past, these will have fallen into two distinct categories. First, those who got themselves into so much trouble that they took their own lives, unable to face what they expected to be imminent prosecution, destitution or bankruptcy.

Secondly, this writer would be most surprised if stress caused by tax deadlines, disputes and other allied issues has not led to health issues and, subsequently, early death for some taxpayers.

However, the latest issue is rather different. As reported in the media, hospital doctors working in the NHS have discovered that as result of the conjunction of rules relating to their pension scheme and general tax legislation, in many cases putting in extra hours either leads to such a penal tax rate that isn’t worth working or, conceivably, actually leaves them out of pocket.

While many of us believe that doctors have a vocation and love their jobs, given the choice between working 70 hours rather than 60 in a week and receiving no reward or paying for doing so, it is not difficult to understand why most will opt to spend a little more time with the family, watching the Women’s World Cup or Wimbledon.

Frankly, if I was a doctor and knew that overtime was being paid at derisory rates, my natural inclination might be to retire immediately and catch up on 25 years of lost sleep.

If doctors aren’t working and operations aren’t taking place, then surely it is inevitable that patients will suffer, in some cases literally dying because of our tax regime. That is wrong.

This columnist is no pensions tax expert but it appears that there are two relatively simple solutions, either of which will immediately alleviate what seems to be a deeply worrying problem.

First, the NHS could alter its policy with regard to pension contributions, which appear to be compulsory even in situations where an option to decline or defer might be desirable.

Alternatively, a limited change to the tax legislation regarding charges on excess pension contributions would be an equally effective quick fix.

This could either apply purely to those in designated professions or across the board, since many might believe that the current pension tax system is in need of an overhaul, having outlived its usefulness after remaining in place for the standard couple of years.

Why is nobody taking any action on either front? It is possible that much is going on behind the scenes, although that is far from obvious. Is the real problem, like so much to do with tax and every other aspect of daily life in Britain at the moment, down to one dread word?

You can get the impression that no civil servant or politician in or around the Treasury (and arguably elsewhere) is doing any normal, day-to-day work as they are obsessing about Brexit and more particularly the potential consequences should whichever of Messrs Johnson and Hunt gets the plum job then goes for the Halloween horror option of no deal?

Replies (7)

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By Justin Bryant
25th Jul 2019 12:57

The only surprise here is that droves more people aren't dying unnecessarily from this Government's complete & utter incompetence if not actual malice inflicted by their not fit for purpose tax system. See:

https://www.telegraph.co.uk/news/2019/07/22/one-three-consultants-gps-ma...

https://www.tax.org.uk/media-centre/blog/media-and-politics/doctors%E2%8...

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By mumpin
10th Jul 2019 13:45

Doctors get paid way too much.
We have 14 GP's at the local healthcentre.
They all work part time.
If you had a choice between working full time for £150k pa, or doing 20 hours a week for £75k pa then wouldn't you do the latter?
And don't get me started on how much pharmacists earn...

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Replying to mumpin:
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By AdShawBPR
12th Jul 2019 10:03

How much is way too much? I'd rather work full time for £150k as long as full time was no more than around 40 to 50 hours per week. And how much do pharmacists earn?

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By meadowsaw227
12th Jul 2019 10:03

The easy answer is to stop the employees/ers paying into a pension once the threshold has been reached.
Any extra income would then fall to be taxed in the usual way.

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Replying to meadowsaw227:
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By AdShawBPR
12th Jul 2019 10:04

Yes but sounds too sensible and straight forward for HM Treasury.

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By grecianwebb
12th Jul 2019 19:03

Doctors in the NHS have defined benefit schemes so modest increases due to overtime can have a seemingly disproportionate affect, especially given they may have a reduced annual contributions allowance.

That said, it is not necessarily correct to say it is not worth them working as it costs them money because it fails to take account of scheme pays rules.

Any excess contributions annual allowance charge can be picked up by their pension fund assuming the paperwork is completed in time. It is only if the Dr chooses to pay it personally is the analysis picked up by the press accurate (and why would they do this?).

I would suggest they arrange the pension scheme to pay and therefore they have not incurred a cost in working overtime. They pocket the overtime pay and their DB scheme pays the annual allowance charge.

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By Knight Rider
15th Jul 2019 10:43

Only an organisation as badly run as the NHS would pay overtime to people on 6 figure salaries. And pensionable overtime as well. One day hospitals will compete with each other for patients and doctors will have to serve them rather than themselves.

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