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  • FIRST POST
    • Indigo05
    • By Indigo05 26th Jun 17, 3:31 PM
    • 9Posts
    • 0Thanks
    Indigo05
    tax relief on pension contributions for higher earners
    • #1
    • 26th Jun 17, 3:31 PM
    tax relief on pension contributions for higher earners 26th Jun 17 at 3:31 PM
    Hi MSE experts,

    One of my hard working friend (7 day a week worker) was enquiring re how she can save taxes as her income is above 150k ( 3 jobs in NHS) and she is paid 44k into pension (GP practitioner NHS pension-employee + employer). She is worried re 'scheme payes' penalty as well; due to recent April 2016 rules re reduction in tax relief on pension contributions for higher earners.

    I suggested paying into venture capitals, EIS etc.

    Other option one of her friend suggested was to have NHS pension breaks once every few months/years to reduce 'scheme pays' liability. Is it legal?

    Her FA suggested to continue paying into NHS pension as it's the best!

    She is aware of her moral obligations to pay more taxes but was wishing to get more information in case she is missing out of any legal ways to minimise tax. She is not wishing to avoid any taxes.

    I'm sorry for long post but wanted to give as much information available so that she can get best advice.
    thanks
Page 2
    • EdSwippet
    • By EdSwippet 28th Feb 18, 8:45 AM
    • 801 Posts
    • 770 Thanks
    EdSwippet
    Tapering is a pain. However, she is only losing the tax relief on the contribution part that is being tapered. She is still getting the employer bit.
    Originally posted by dunstonh
    A particular problem with the taper is that 'scheme pays' is usually(*) unavailable, meaning that contributions above the taper are double-taxed.

    Suppose a £100 total (employer plus employee) contribution above the taper. There is £45 tax to pay in the year of contribution. On withdrawal, £25 could be tax-free and £75 taxable. A retired basic rate taxpayer gets back £40 of the original £100, for an effective 60% tax rate. For a higher rate taxpayer this drops to a £25 return and effective 75% tax rate. These are the sorts of numbers to look at when evaluating whether employer contributions can overcome the penalties.

    If the pension also breaches the lifetime allowance the outcomes worsen further, to the point where the higher rate taxpayer receives £0 and pays 100% in tax. And no level of employer contribution can overcome that.

    (*) Some schemes do provide 'scheme pays' for exceeding the taper. Apparently, the GP's pension scheme does not.
    • Indigo05
    • By Indigo05 28th Feb 18, 10:45 AM
    • 9 Posts
    • 0 Thanks
    Indigo05
    GPs' pay include an element representing the employer contribution to the NHS Pension Scheme that the GP themselves then actually pay if in it.

    I'll be honest, GPs and pensions is a pretty specialist area - your friend needs proper (paid) advice, not generalist guidance from anonymous people on the internet.
    Originally posted by hyubh
    Thank you for your post. She has decided to pay but there are not many specialist IFA in this area. There are technical issues as well due to Capita not updating pensions quickly, Total reward website is not great as her info is missing on it and she has to contact NHS pension yearly to get up to date information
    The IFAs which are around are not that helpful/ knowledgeable even for others, even after paying. She is been informed that these advisors keep on changing advice every time query is raised on the report. Hence no confidence. Says no single GP has found an expert IFA in this area.
    I think that there is a big gap in the market, in this specialist area and no one is recommending her one 'speaclist IFA for GP pension with confidence
    Any recommendations for a reliable IFA in this field?
    • andy001
    • By andy001 19th Mar 18, 10:09 PM
    • 54 Posts
    • 24 Thanks
    andy001
    EdSwippet

    Thatís great analysis

    • xylophone
    • By xylophone 19th Mar 18, 10:18 PM
    • 26,885 Posts
    • 16,037 Thanks
    xylophone
    She might try a specialist IFA - examples from Googling


    https://www.bma.org.uk/advice/work-life-support/your-finances-and-protection/independent-financial-advice

    http://www.legalandmedical.co.uk/advisers/

    http://www.bw-medical.co.uk/the-experts/kevin-walker/

    https://cavendishmedical.com/independent-financial-advisor-nhs-pensions/
    • andy001
    • By andy001 13th May 18, 9:32 PM
    • 54 Posts
    • 24 Thanks
    andy001
    Is there a chance for OP to do contribute up to 10k pa only, to avoid tapered charges and to reach LTA bit late?
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