The NHS Pensions Agency begins to send out annual pensions statements towards the end of summer.
These letters detail your annual pension input for the preceding tax year and can be essential in calculating your own position in terms of yearly pension savings.
As we know, there is a limit to the amount of tax-free pensions savings which can be accumulated known as the annual allowance. If you breach the £40,000 cap you could be liable for a tax charge on the excess pensions savings at your marginal rate of income tax.
The NHS Pensions Agency should write to you if you are likely to breach the limit. However, this does not always happen automatically and long delays can sometimes occur meaning that you might receive your information far too late to act on it. You should therefore actively request your statement from the NHS Pensions Agency as soon as possible.
Doctors with higher incomes have an additional challenge to face. There is a new tapered annual allowance for those doctors with adjusted earnings (ie all their NHS and private earnings plus interest from savings plus the actual growth in the pension itself) of over £150,000. This reduces the permitted annual allowance down from £40,000 to as little as £10,000 per year for some.
Unfortunately, the NHS Pensions Agency will not issue annual statements to those breaching the new tapered annual allowance – just the standard annual allowance – so many doctors could unknowingly trigger substantial tax bills.
Do not delay in finding out where you stand. The annual allowance is a highly complex calculation and if in any doubt of your position, seek help as early as possible.
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Tax Planning is not regulated by the Financial Conduct Authority.
