NHS doctors threaten to quit over Labour pension tax raid fears

[dutchman]

Senior GPs consider taking early retirement as Rachel Reeves’s Budget looms



Senior NHS staff are considering taking early retirement amid fears of a Labour tax raid on pensions.

Savers with a defined contribution pension can currently access 25pc of their retirement pot as a tax-free lump sum, up to a maximum of £268,275. However, Rachel Reeves has been urged to slash the limit to £100,000 in her first Budget next month.

Wealth managers and pension experts told The Telegraph that they had seen a surge in GPs and consultants enquiring about bringing forward their retirement to avoid a potentially large tax bill.

Graham Crossley, founder of the NHS pension advice service, Medifintech, said he had been contacted by “several hundred” high-earning staff aged 55 and over since Labour came to power.

He added: “Getting rid of tax-free cash has been a worry in every Budget, but with the change of government it’s particularly acute.

“The issue is uncertainty. Members are saying: ‘I was thinking of retiring in the next 18 months anyway – do I risk a major tax hit or just retire now?’. Typically, those who would worry about the lump sum allowance tend to be higher earners – consultants, GPs, senior managers – the kind of people you would want to stick around at the moment to sort out NHS waiting lists.

“The IFS’ [Institute for Fiscal Studies] suggestion is to reduce the lump sum from £268,000 to £100,000 – that’s a lot of extra tax that someone has to pay.”

Bringing forward retirement could prove costly for NHS staff, he added, as the pay rises they secured this year are yet to be reflected in their final salary pension calculations, reducing their entitlement throughout retirement.

Older NHS staff receive a lump sum automatically upon retirement. Newer staff can also take a chunk of their pot in exchange for small monthly payments throughout their retirement, sacrificing £1 of lower income per year for every £12 of lump sum they take.

Staff can also choose to take partial retirement, allowing them to draw their pension while continuing to work.

Greg Hendricks, of Wesleyan Financial Services, said: “As rumours continue to swirl around what will come in the Autumn Statement, we’ve definitely seen more doctors get in touch about potential pension changes.

“Lots of these enquiries have been related to lump sums. Many doctors depend on their lump sums when they reach retirement age and beyond and want to get the most out of it.”

The Chancellor has indicated that she will raise taxes in her first Budget on October 30. Her commitment to not raise taxes on “working people” suggests pensioners will be targeted.

The tax-free lump sum is considered one of the most generous and best understood tax breaks for pensioners. It can be taken in one go or across several withdrawals, and often forms the bedrock of retirement plans. The £268,275 allowance was frozen in 2020 to 2021, meaning the real value of the lump sum is already diminishing each year with inflation.

Ian Cook, of wealth manager Quilter, said he had NHS clients mulling early retirement as a result of pensions uncertainty.

He added: “One of my clients is an NHS consultant – after the LTA was abolished she decided to stay on in the NHS. She’s only 56, and ideally wants to carry on working until she’s 60 and beyond.

“But now the lump sum is under threat and she will decide whether to retire or not depending on what happens with pensions in the Budget.”