Pension penalty trap

As chairman at NASDAL, his advice to dentists who haven’t yet received a Pensions Saving Statement is to contact NHS Pensions and apply for one.

Nick explains that a potential penalty could arise for some dentists as a result of the Government’s reduction in the Annual Allowance – the amount that can be paid into a pension - from £255,000 to £50,000. Because the profession hasn’t had to be wary of exceeding their pension limit before Nick is concerned there may be some unwitting victims.

“Some dentists may think they don’t pay in as much as £50,000 annually but complex formulae are employed to calculate the annual input into the pension. These formulae or dynamising factors inflate the worth of the payments so that the contributions are deemed to be much higher than what is actually paid in.”

Nick said that those dentists with a significant commitment to the NHS and whose deemed pension contributions are more than £50,000 don’t have to worry as they will receive a letter from NHS Pensions alerting them to the over-payment. They then have the opportunity to choose to pay HMRC a penalty charge which effectively postpones the payment to retirement.