How lifetime allowance change affects GPs' pensions

In the last Budget, the chancellor announced that the lifetime allowance (LTA) for pensions would reduce to £1m from 6 April 2016. This marks the eighth change to the LTA since its introduction in 2006.

This statistic does not even take into account the personalised LTA afforded by certain forms of protection, since 2006, such as primary or individual protection.

When the LTA was first introduced the legislation allowed for a gradual increase from £1.5m to £1.8m, with the prospect of reviewing this every five years. The intention was that it would continue to increase. In fact, the opposite has happened, with continual reductions to the LTA.


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Unfortunately the latest announcement will affect almost all GPs at some stage in their career, posing many complicated financial planning issues, both now and in the future.

For example, consider a 46-year-old GP who has accrued an NHS Pension of £44,000 (giving a current lifetime pension pot of £1,012,000). Will this GP join the new 2015 NHS Pension Scheme, for one year’s service, before applying for new fixed protection fixing the LTA for their pension at £1.25 million?  

Or would it make better financial sense for the GP to make a one-off personal contribution utilising unused tax relief over the last three years into a personal arrangement, which could then be drawn down in a flexible way from age 60, without penalty?

Obviously the answer to these questions will depend on personal circumstances, but the change will certainly mean GPs have to consider their pension and retirement options more carefully.

It is also likely that many GPs will now want to make use of investment ISAs, particularly if they are weighing up whether to come out of the NHS Pension Scheme due to a reducing LTA.

Retirement planning for GPs was already very complex but it has just become considerably more so. It is vital that GPs seek specialist independent advice about their pension from an adviser who understands both the NHS Pension Scheme and changes to pension legislation to ensure they can fund their retirement plans.

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