Loan penalties blocking GPs from retirement

Accountants appeal for rethink on terms of long-term loan deals that have been taken out by practices.

High early repayment fees on long-term practice loans have left some GPs unable to retire, accountants have warned.

Richard Melbourne, an accountant at Surrey-based firm Tudor John, is appealing to financial services giant Aviva for leniency over the £200,000 early redemption charge one of his practice clients is facing on a 30-year £700,000 loan taken out 10 years ago.

Thousands of practices are thought to have taken out loans with similar penalty fees through the General Practice Finance Corporation, which became a subsidiary of Norwich Union and is now owned by Aviva.

Mr Melbourne says the practice he represents is unable to attract new partners while the repayment penalty is in place.

He said: 'This is particularly worrying for one of the partners who wants to retire. If she does retire she will have to take the loan with her as it stands.'

Negotiations with Aviva have ended in stalemate with the financial services firm only able to offer a new loan with a higher interest rate, he said.

'All this does is switch the penalty from a redemption payment to higher interest rates.

It still gets its money,' he said.

Mr Melbourne says that even though the original loan documents are vague on the extent of the redemption penalties he is not advising his client to seek legal redress based on mis-selling.

A class action organised by law firm Rubric Legal six years ago failed before it reached court as GPs were hesitant to pay the legal costs involved.

Action through the Financial Service Authority's financial ombudsman is also not available to the practice and many others as they have more than 10 staff.

Mr Melbourne said: 'Unless Aviva can change its mind there appears to be no way out for practices caught in this situation.'

Aviva was contacted but had yet to comment as GP went to press.

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