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Pension contribution changes for NHS GPs, hospital doctors and staff

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What has changed? 

Previously, individuals had an annual allowance of £40,000. This is the amount of growth (over inflation) in capital value of their NHS Pension benefits each year on which they receive tax relief, providing they have sufficient earnings. That growth is known as their ‘pension input’. 

From 5 April 2016, individuals with “turnover” of over £150,000 will see their annual allowance tapered down to a minimum of £10,000.

Any growth in excess of the annual allowance is subject to a tax charge at your marginal rate and should be included on your tax return.

How do we calculate ‘income’ for this change?

To test whether or not an individual is caught by this change, a calculation of their ‘adjusted income’ is required.

The starting point is to determine if the individual has gross taxable income of £110,000 or more. If gross taxable income is less than £110,000, the individual keeps their full £40,000 allowance.

If gross taxable income is more than £110,000, we then have to add the value of all pension inputs made during the year. Any non-NHS pension contributions will also be included.

If the resulting ‘adjusted income’ is more than £150,000 then the annual allowance is gradually reduced by £1 for every £2 that exceeds £150,000, to a minimum of £10,000. 

What can I do about this change?   

For many NHS scheme members with income over the threshold, this change means that they’ll continue to contribute to their scheme as normal but will suffer a tax charge each year. The charge can be paid via your tax return or by electing for ‘scheme pays’ so that the tax is paid by NHS Pensions, with a subsequent deduction from your pension benefits. Some may decide to opt out of the scheme in the right circumstances, after taking relevant advice.

These rules are very complicated and we strongly recommend you speak to our specialist medical team on 0330 024 0888 as well as your Independent Financial Advisor.


Louise Dean



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Larking Gowen

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