The new pensions consultation is out, and at heart it’s the government asking doctors to decide what pensions measures would get them to do extra work. As I’ve said before, that is a different proposition than asking them to keep doing existing work under altered T&Cs, because the government have allowed things to get to the point where work has already been given up.
There are several factors people will consider in making this decision, and ‘how much will I earn after tax’ is certainly one. But another is ‘how much time and effort will it take to figure all this out?’. People are sick to the back teeth of the pensions system and the ‘organisational fatigue’ of dealing with PCSE and NHS Pensions.
Am I, therefore, going to do extra work which will require me to:
- sit down at the start of the year and guess my income for the next 12 months
- work out the tax implications of that, factoring in the loss of personal allowance, AA tapering
- estimate my ‘deemed pension growth’ (which is virtually impossible even if NHS Pensions have accurate pension data for me – and we know they almost never do)
- set a pension contribution tier
- monitor that tier regularly through the year
- adjust it late in the year, running through all the steps above, to ensure I’m not hit with a significant tax bill
I would suggest that people will just sit tight and do less work for a smaller income, because the steps above are significant and ultimately you are being asked to do them, by the government, so you can have a smaller pension at the end of it.
So what would work? While flexible accrual sounds sensible, it requires you to estimate pension growth, and that’s inordinately difficult – even more so for GPs than consultants, and it’s telling that not one of the worked examples in section 10 of the consultation covers a GP’s situation.
Better would be saying at the start of the year: I would like to contribute to my pension up to the point at which the annual allowance is reached, and no further. NHS Pensions can then figure that out and stop your contributions when you get there.