We look at a recent case where Andrew Jaworski, Independent Financial Adviser for Chase de Vere Medical in our Chester office, with the help of our technical support team, will reduce his client’s tax bill by £44,225.
Andrew has been an independent financial adviser for 20 years and since 2013 has specialised in advising medical professionals such as NHS consultants and doctors. He provides a comprehensive financial planning services and has particular expertise of the NHS Pension, taxation and retirement planning.
Andrew’s client is 66 years old and continues to work as a medical professional, having drawn his NHS Pension at age 60. He was referred to Chase de Vere Medical because he was worried that he had breached his pension Fixed Protection 2012, as a result of his NHS Trust having previously auto enrolled him into a NEST pension scheme.
His Fixed Protection 2012 had given him a personal Lifetime Allowance of £1.8 million and is intended to protect pension benefits built up before 6 April 2012, but severely limits an individual’s ability to accrue further pension benefits. If this Protection is broken, as a result of additional pension contributions or accrued benefits, the individual typically reverts to the standard Lifetime Allowance amount.
With the client’s permission, Andrew liaised with the NHS Trust with regard to his NEST pension contributions. As well as concerns about the client breaching his Fixed Protection, it was also understood that the proceeds from this pension would be very small and they would also be subject to a 55% tax charge, as the client had already exceeded his pension Lifetime Allowance. As a result, Andrew arranged with the Trust for the NEST pension to be unwound and all contributions into the scheme to be cancelled.
However, despite having a long-standing financial adviser before he spoke with us, the client had remained an active member of the NHS Pension Scheme and so had accrued benefits which had broken his Fixed Protection. It appears that his existing adviser didn’t fully understand the NHS Pension and/or the Protection rules as they didn’t realise that remaining a member of the NHS Scheme would breach the rules.
Help from our Technical Advisory Support team
Because of this breach, his whole pension situation was a bit of a mess and it looked as though the client would revert from a Lifetime Allowance of £1.8 million to the standard amount, which is £1.0731 million. This means that he will face a very large tax bill when he crystalises his further pension benefits.
Chris Howerd and Adele Walwyn, in our Technical Advisory Support team, did a fantastic job of working through the information and producing a detailed report for the client which identified the date, which was in 2013, that his Fixed Protection 2012 was broken.
As a result of their efforts, the client was then able to apply for Individual Protection 2016 which gave him an enhanced Lifetime Allowance of £1.25 million. While still facing a significant tax bill, Chris and Adele’s efforts will reduce his tax bill by £44,225.
The Financial Conduct Authority does not regulate tax advice
Content correct at the time of writing and is intended for general information only and should not be construed as advice.