I must confess to never really understanding much about pensions. Rightly or wrongly, I just assumed that I was a fairly standard NHS consultant and that both my tax and my pension were straightforward and predictable. I’ve been a consultant for 19 years – initially part time and more recently full time, and I don’t do any private practice.
About six weeks ago I was doing my daily trawl through my Twitter account and I came across the story of a psychiatrist who described herself as a 52-year-old full time NHS psychiatrist with no private practice, who was awarded a Bronze National Clinical Excellence Award, and who had just discovered that she had a massive pensions tax bill of approximately £70,000.
As I read her short Twitter thread, I felt a mounting sense of panic. She sounded frighteningly like me. It slowly dawned on me that I really needed to find out more about my own pension situation.
By coincidence, two days later Dr Tony Goldstone came to give a talk at my Trust. Tony is a radiologist and is the BMA’s (British Medial Association) National Clinical Advisor on Pay and Pensions. Ordinarily, nothing would have induced me to stay back after work to hear a talk on pensions. This time, I was in the front row of the audience and as I listened to his talk, I had a rising sense of anxiety. Having hoped to come away reassured, I simply felt a terrible sense of impending doom.
Since that talk I have spent many hours using the BMA’s ‘Goldstone Pensions Tax Calculator’ and talking firstly to a financial advisor, and more recently to an accountant. I don’t yet have my final tax bill, but it’s almost certainly going to be well over £50,000. Most of this was payable in the 2017/18 tax year - so I also face a 5% surcharge for late payment.
To suddenly owe that kind of money is very frightening and I have lost a lot of sleep since then, and shed quite a few tears too. I feel rather ashamed of myself for being so naïve, and frankly stupid. I am kicking myself for taking my eye off the ball. Perhaps a savvier person would have avoided at least some of this tax?
It has been curiously comforting to talk to colleagues who all feel the same sense of bewilderment and confusion. The whole pensions tax system seems phenomenally complicated and almost designed to be impenetrable and impossible to understand. I have never had an accountant before, but now I feel ridiculously grateful for the advice and clear thinking of the accountant who is helping me. It goes without saying that neither me nor my colleagues have a problem with paying our fair share. We are public servants and believe passionately in the NHS. But it stings to be handed an astronomical and unexpected bill, incurred as a strange form of punishment for career advancement and picking up extra shifts to help carry some of the rota pressures we all face.
I still have a way to go to resolve my pensions issue. I need to have the total amount of tax confirmed and then work out how on earth to pay it. The commonest method of using the pension scheme to pay the bill comes with a stinging 5.5-6% interest charge. After that I need to consider how to minimize my pensions tax bill in the future and that means a cold hard look at the work I currently do – all of which I love.
This has been a very bruising experience and one that has dented my morale and made me wonder what a strange world we live in that seems to financially penalise hard working public servants.
Crucially, no doctor can assume they are immune to these taxes – so whether you are young or old, part time or full time, please take a careful look at your pension and make sure you aren’t sleep walking into a massive tax bill, as I have done.