Medical Family Finance Client Newsletter - Spring 2023

+ Thank you for rating us a ‘top firm’

We are delighted to announce that Medical Family Finance has been declared a ‘Top Rated Firm’ in the Financial Adviser Guide 2023. The annual guide is compiled by review website VouchedFor and was published in The Times in March.

We were given the top rating for ‘championing transparency and the value of great advice’ based on the consistently high reviews given by you, our clients.

Thank you to our staff for working hard to achieve this accolade and to the many clients who have taken the time to give valuable feedback on our services.

Our director Paul Hart said: “We are proud to have won this award – it is a privilege being able to support busy medics who are faced with constant tax and pension reform and a tough financial landscape to navigate.

“Platforms such as VouchedFor allow doctors to find us based on transparent reviews of real client experiences. We really appreciate all the comments and are grateful it has led to this

external recognition too.”

If you would like to leave a review of your adviser, please visit vouchedfor.co.uk and click ‘search by name’ to input your adviser’s details.

Listening to you

Although we are naturally very pleased to receive positive comments, we are also keen to hear how we can do better.

If you have found that your experience with us has not been as you hoped, please do let us know. We are always striving to improve our services and we really do welcome all feedback. Recently, a client told us that our email reminder concerning his forthcoming adviser review was not up to our usual standard. This constructive feedback is very important and with his help, we were able to improve our meeting communications for all clients immediately.

Please email administration@medicalfamily finance.co.uk if you have concerns, thoughts or ideas for us to take forward.

+ Q & A – Pensions tax and retirement flexibilities

The recent announcements in the Budget regarding pensions tax and the outcome of the consultation into NHS retirement flexibilities have brought welcome news for many clients. However, these measures have added further complexity to already convoluted regulations and possibly created some confusion too. Here we present a round-up of some of the key issues.

Has the lifetime allowance been abolished?

At the lecturn on Budget day, Mr Hunt said he would ‘abolish the lifetime allowance altogether’. Actually, he has removed the tax charge of the lifetime allowance. This means that technically the lifetime allowance or LTA is still in place until April 2024 when it will then be eliminated completely.

Could the LTA be brought back by a subsequent government?

In the aftermath of the Budget announcements, Labour politicians expressed that should their party be elected in a general election, they would reinstate the LTA. The next general election is due to be called by January 2025.

While we cannot predict whether this would be actioned in reality, we are mindful of the confusion this might cause. If it was reinstated, further ‘protection’ schemes would likely be created to protect previous retirement values. Labour has also announced that should the LTA be reinstated, doctors could be exempt in the same way that judges are currently removed from the tax-free savings limits.

What is the new tax-free lump sum figure?

The tax-free lump sum figure or pension commencement lump sum (PCLS) is now capped at £268,275 (25 per cent of the previous lifetime allowance figure). Those who have previously applied for LTA protection can keep their higher tax-free cash amount.

This means that although you can now save more in your pension overall, you are still going to be taxed on drawing benefits over and above the PCLS cap.

Will former pension ‘protection schemes’ still be valid?

The finance bill published at the end of March set out key details about how the new lifetime allowance rules will operate going forwards.

Those with enhanced protection and fixed protection registered before 15 March 2023 can now pay in new contributions to their pensions and retain their existing protected tax-free cash entitlement. Formerly, both protection types were lost if benefits were accrued.

However, the maximum amount of tax-free cash someone with enhanced protection can take will be restricted to the amount they could take on April 5, 2023.

What is enhanced protection?

This protection scheme was available to individuals with any level of benefits at 5 April 2006 who registered before 5 April 2009. If the individual drew benefits, no lifetime allowance charges would arise, regardless of the size of the fund being crystallised.

From 2012/13 the pension commencement lump sum (PCLS or ‘tax-free cash’) for those with enhanced protection was limited to 25 per cent of £1.5m or the standard lifetime allowance, whichever is higher.

Protection holders could add lump sum protection too – if their lump sum pension rights were more than £375,000 at 5 April 2006. These rights can be found on the official protection certificate received when it was first registered.

What is fixed protection?

There are three types of fixed protection – each version was introduced to compensate for subsequent cuts to the lifetime allowance. They give different levels of protection but operate in the same way. There is no lump sum protection – the maximum tax-free cash amount is always 25 per cent of the sum protected.

Here is a summary of the various fixed protection schemes:

I opted out, should I start to contribute to the NHS pension again?

The removal of the lifetime allowance and easing of the annual allowance does not mean those that have been opted out of the pension for a reasonable period should automatically start contributing again. This is because inflationary increases, which will have been accrued at no cost as a deferred member, will be lost on re-entering the scheme. It is important to check your own particular position before taking action.

Will the annual allowance still be a problem?

The annual allowance has been increased from £40,000 to £60,000 which should mean the majority of clinicians can avoid excess tax on their pensions’ growth. The tapered version of the allowance which further penalises higher earners depending on income has been raised to £10,000 from the current £4,000 which is further good news.

You will also need to be earning more before qualifying for a tapered annual allowance. The ‘adjusted income threshold’ has increased from £240,000 to £260,000. Adjusted income includes your NHS pensions growth and any personal pensions, on top of your work earnings, investment dividends and buy to let income, for example.

Why are public sector pensions now ‘linked’?

The Budget papers confirmed that public sector pension schemes will be considered ‘linked’ for the purposes of annual allowance calculations which is a positive step. This means that negative pension growth in the 1995 section can be offset against positive growth in the 2015 scheme.

What is the difference between ‘retire and return’ and the new ‘retire and rejoin’?

If you have accrued benefits in the 1995 section, you can now ‘retire and rejoin’ which means you can retire, draw NHS pension benefits and rejoin the 2015 scheme to accrue further benefits. You can retain your current job role.

Previously, doctors could ‘retire and return’ but would not be guaranteed to return at the same status.

What is the new partial retirement option?

From October 2023, doctors can retain their current role (including the same terms and conditions of their contract) while accessing partial retirement. If you are age 55 and above, you can take up to 100 per cent of your pension benefits.

If you choose this option, you must reduce your pensionable pay by at least 10 per cent. New guidance has been promised as to how this might work in practice, but could include an option to make some PAs non-pensionable.

+ Medical mortgages

Will my pensions’ growth still be skewed by inflation?

The recent NHS consultation confirmed that the date the 2015 pension scheme is revalued each year will now be on 6 April rather than 1 April. This will remove the valuation anomaly producing skewed pension growth and subsequently, larger pension tax payments.

What is the latest on the McCloud Remedy?

In March, a further 12-week government consultation was launched (McCloud part 2) to discern how the McCloud Remedy will be implemented. To recap, the remedy is the plan to alleviate the deemed age discrimination caused by moving some members to the 2015 scheme.

Affected members will be able to choose between remedial benefits from their new scheme or from their legacy scheme for their service during the remedy period which is between 1 April 2015 and 31 March 2022. The remedy is due to be implemented from 1 October 2023 but it is believed there have been significant delays to the legislative paperwork needed.

Here to help

If you have any queries concerning the regulatory changes announced in the Budget or in the NHS consultation, please do speak with your adviser who will be happy to discuss your own position.

Beulah said: “We’re really pleased to be helping so many doctors with their property concerns. You need to find a mortgage adviser who understands your remuneration package and complex income streams, plus they need to explain these to lenders.

“You may also be looking for high value properties that would normally result in a smaller group of lenders and want to broaden your search.

“Whatever stage of your career, whatever property you are looking to purchase, we can ensure a smooth process and a happy result.”

Our mortgage specialist Beulah Antonin will now provide mortgage advice to our clients through our sister company Charterhouse Mortgages and Protection.

Beulah and her team are experts at helping doctors find the right mortgage whether it’s a new home, a retirement project, an investment asset or a first-time purchase to help children. They understand how medical income should be treated in terms of securing the best deal for your purchase.

Beulah has also received incredible scores on the VouchedFor website for her work. Here’s one of her recent reviews: “Beulah was brilliant. From the outset, communication was fantastic, she was quick to respond to all of my queries and gave great advice about mortgage options available. She has a lovely manner, is very patient, friendly, and has a remarkably calming influence. I couldn't fault her.”

For a complimentary consultation regarding your mortgage or indeed, our protection products, please contact Beulah on beulah.antonin@medicalfamilyfinance.co.uk or 020 7252 5765

+ Comment: Paul Hart, director

Cash, the invisible thief

Back in 1950, Enid Blyton published her book ‘The Mystery of the Invisible Thief’ about a man masquerading in disguise to steal from villagers.

In 2023, our story has a new thief but it is still invisible. If you have too much of your wealth held as cash, inflation is stealing your money, without you even noticing.

The consumer price index dropped marginally in January to 10.1% (from 10.5% in December) but rose again to 10.4% in February to 10.5% from 10.7% in November. The Bank of England voted in March to raise interest rates again in a bid to tackle inflation but the target rate of 2% seems quite some way off.

Some investors believe holding cash is a safe option but in fact, it can be one of the biggest risks to retirement pots. Holding too much for too long can have a substantial impact on your future wealth.

Historic data proves that the most effective way for your money to beat inflation is to maintain investments in the stock market with a well-diversified and risk-appropriate portfolio.

Economists are uncertain of when inflation will start to wane but waiting for a return to ‘normal’ before deciding what to do with your surplus cash is unwise. Similarly, returning your investments to cash during times of market volatility will be challenging –scientific evidence tells us that timing the market is (almost) impossible and investors often find they have held on to the funds longer than intended, missing potential gains.

It is normal to want to hold some cash to deal with life’s unexpected requirements (especially if this gives emotional peace of mind as well as practical) but this should be a small part of your financial strategy.

In the early fifties, when Enid wrote her ‘Invisible Thief’ book, inflation hovered around 9 per cent. It did eventually fall to nearly 0 per cent but took a decade to do so.

+ Time running out to boost state pension

Individuals with gaps in their national insurance record between 2006 and 2016, will now have until 31 July 2023 to make voluntary contributions to HMRC in order to gain the full state pension.

The original deadline has been extended from 5 April because many people reported being unable to get through to government helplines set up to assist those checking figures and historic data.

After the summer deadline, it will only be possibly to top up gaps

+ In brief

Adding to our team

We have recently welcomed Jade Ballard to our client services team. Jade assists our advisers and helps clients with any queries. She also holds a first-class degree in criminology with criminal law.

in the national insurance record from the previous six tax years. In general, taxpayers need 35 years of national insurance payments to get a full state pension. Those who do not have enough qualifying years can pay to boost their record by making additional contributions – a lucrative exercise for most as a relatively small outlay can generate a much larger pension at retirement.

To check your national insurance record or obtain a state pension forecast, please visit www.gov.uk/voluntary-nationalinsurance-contributions