Wealth manager Quilter has warned doctors and senior medical professionals close to retirement to halt their plans and seek professional financial advice before quitting work.
Quilter said retirement plans should be reconsidered following the shock Budget announcement yesterday that the Lifetime Allowance would be axed.
Quilter said those about to retire with Lifetime Allowance (LTA) charges should consider deferring their retirement until after 6 April.
Chancellor Jeremy Hunt delivered a Budget bombshell yesterday when he announced unexpectedly that he would axe the £1.07m LTA from the new tax year.
Graham Crossley, NHS pensions expert at Quilter, said senior doctors should halt any immediate plans to retire and get financial advice.
He said: “Following the huge news that the lifetime allowance is set to be scrapped, we are urging senior doctors about to retire with LTA charges to consider delaying their retirement date until after April 6th so that they can avoid eye-watering lifetime allowance tax charges.”
A Freedom of Information request submitted last year showed that April 2022 saw a record number of pension benefits being awarded to NHS staff, indicating a significant jump in those retiring, said Quilter.
Many senior doctors decided to retire rather than face punitive tax charges on their pensions. Quilter believes this number is likely to be “similarly large” this year due to the same pressures.
Quilter says that waiting for a month to review retirement plans could save considerable sums in tax for anyone who has fallen foul of the lifetime allowance.
NHS pensions are managed by the NHS Business Services Authority (NHBSA), an agency of the Department of Health and Social Care.
Mr Crossley said: “We urge the NHSBSA following today’s announcements to contact any members about to retire with lifetime allowance issues and warn them to delay.
“While there is still work to do, the changes in the Budget represent a huge win for the industry which has lobbied government for a long time that systemic issues with pension taxation was causing huge problems for the health service.
“However, it is so important that those who can still take advantage of the announcements change their plans slightly and take advantage of a much more favourable tax landscape for the NHS.”
Damien Bowler, pensions technical manager at Curtis Banks, said: “These changes will encourage savers to work longer and contribute further to their pensions, allowing savers to either bolster their pension pots for retirement or help those that can afford it to leave a great legacy.
“To facilitate the ability to grow pensions, the government has increased the Annual Allowance from £40,000 to £60,000, helping savers get more into their pension pots on an annual basis and keeping highly skilled workers in the labour market. As a result, an estimated 80% of NHS doctors will not receive a tax charge with respect to the accruals under the 2015 NHS career average scheme.
“Today’s Budget is a positive statement for pensions. It could, however, have been even greater had the tax free cash (TFC) entitlement been improved. Although the LTA has been removed, the TFC limit has been capped at its existing rate, which, whilst simplifying in certain areas, will ultimately result in greater confusion, leaving many disappointed.
