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Radical changes to GP retirement plans after Autumn Statement

George Osborne was unkind to GPs in his Autumn Statement, and especially unkind to Steven Caps as it was his birthday. Steven runs our financial services company, and spends his time assisting clients with their financial plans.

It took less than a minute for Mr Osborne to announce the changes to the annual allowance and the lifetime allowance, but the effects for GPs are enormous. The reduction in the lifetime allowance from £1.5m to £1.25m means that a GP planning to take their pension could have received up to £65,217 without any tax consequences, but at a stroke, the reduction to £1.25m reduces the maximum pension to £54,347. Unless the GP has some form of protection (enhanced or primary or fixed – and most don’t) having a pension pot of more than £1.25m attracts a tax liability of up to 55% on the surplus. Ouch!

So, a diligent GP, carefully providing for their retirement is suddenly looking at making radical changes to their retirement plans. This change comes in to play on 6 April 2014, so I suspect in the next 15 months we will be seeing a number of GPs looking at 24-hour retirement or leaving the scheme.

The annual allowance, the amount you can pay into the scheme is reduced from £50,000 to £40,000. Don’t forget, to work out how much you are paying in to the superannuation scheme, you don’t look at how much you are actually paying into the scheme (yes I did mean to write that), you have to find out how much your projected pension has increased over the last year, and multiply that by a factor of 19. Now without going into details, if you are an average earning GP over 50 years of age you may well hit the £40,000 limit, and if you are younger and paying added years you are also likely to hit the limit. The consequences of exceeding the £40,000 limit is that you have to pay tax at your highest rate on the excess.

No doubt GPs will be looking very carefully at their retirement plans, these changes will affect a great many GPs.

As for Mr Caps, I can see him across the third floor at Ramsay House drowning in calls and emails. Christmas has just been cancelled!

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