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Cuts in pension savings tax relief encouraging doctors to retire early?


The British Medical Association (“BMA”) is claiming that cuts in tax relief on pension savings are unfair as they are hitting doctors particularly hard compared to other high earners.

Over the past decade the annual allowance limit on pension savings benefiting from tax relief has fallen from c. £255,000 to £40,000. There have also been cuts to the Lifetime Allowance, currently at £1.055m for tax year 2019/2020, which governs how big a pension can grow and benefit from tax relief.

Doctors pay pension contributions based on their salary band but do not have the same flexibility to control these levels as in the private sector. Therefore, high earners like senior doctors and consultants can be at risk of breaching these pension limits and therefore potentially face significant tax bills. According to the BMA this is forcing some consultants to reduce working hours or even leave the profession before normal retirement age to avoid effectively working for nothing.

The squeeze on pension tax relief will also affect many other higher earning professionals in the public and private sectors.


It could be argued that this unduly penalises todays high earners when yesterdays high earners had more scope and time to build up tax efficient funds for their retirement given the more generous allowances prevailing at the time.


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