The Consultant Promotion

The Case

Dr Smith is 50 years old and is a consultant on the ‘2003’ contract.  On the 1^st April 2018 he moved up from level 6 (£93,459) to level 7 (£99,254).  He is also in receipt of 5 CEAs (£15,080).  This means that his total pensionable pay has increased from £108,539 to £114,334.  He has also taken on extra responsibility in his department and he has been given an extra PA to reflect this, taking his total to 11.  His total accrued service has increased from 30y 150d to 31y 186d as he is also purchasing added years. He is concerned about how these changes affect his pension benefits and whether he will liable to any tax charges.

The Issues

• Dr Smith has benefited from a large increase in pension benefits in the year of close to £4,000.  This is greater than the annual allowance threshold so he may have a tax charge
• Dr Smith’s additional PA is not pensionable but it will taxed and he will, in all likelihood, lose more of his personal income tax allowance
• Dr Smith’s total pay has moved him in to the top pension contribution threshold, so he will now have to pay 14.5% of his salary as a pension contribution.
• As Dr Smith was only 44 in April 2012 he joined the 2015 Pension Scheme on 1^st April 2015.  He will from that point accrue benefits in both schemes.
• As his 1995 pension and Added Years contract retain their final salary link he will need to calculate growth factors for both schemes, even though, theoretically he is no longer paying in to the 1995 scheme.

The Options

Dr Smith should contact us immediately to consider the AA implications, including using the carry forward facility.