Consultant psychiatrist Kate Lovett suspected she would be hit with a sizeable tax bill after receiving an increment and a bronze national clinical excellence award in the same year – but she didn’t expect that it would be some £27,000 more than her entire annual earnings.

Now she is faced with the prospect of remortgaging her house or raiding her pension fund to pay a likely bill in excess of £150,000 – and is also anticipating the gutting probability of having to cut back on her professional commitments to safeguard her financial future.

‘I’ve had a predicted tax bill from my accountant that is for £27,000 more than I earned in that tax year – 2018/19,’ explains Dr Lovett, who works in community psychiatry in Plymouth but is also dean at the Royal College of Psychiatrists.

‘The reason that my pension growth was so big in that year was that I had the perfect storm in terms of receiving an increment, getting a bronze merit award, and I also have mental health officer status. But I do no private work and I don’t have any other streams of income.’

What makes it worse in a way is that Dr Lovett was encouraged to apply for the merit award – worth an annual (and pensionable) £36,000 – and decided to do so partly because she was aware of the gender pay gap and wanted to ensure women were better represented among those receiving this kind of recognition.

It was her work on the national stage with the college that was the main driver for it, particularly her role in education and training and improving recruitment to the specialty.

It's fair to say I've been anxious about it.

Kate Lovett, consultant psychiatrist

Personal cost

This role – on top of a busy day job – has naturally taken its toll on other parts of her life. ‘I’m away from home frequently and I work most evenings and Sundays. My free time is extremely limited. It’s a real privilege to be able to do what I do, and I wouldn’t choose to do anything different, but it does come at a cost.’

Like many of her female medical colleagues, Dr Lovett had taken the decision to work part-time while her children were growing up – taking the concomitant salary (and pension) hit for doing so. Now, as a direct result of the punitive pension tax changes, she is contemplating reducing her hours again, although it is the last thing she wants to do. ‘This is terrifying – here I am at 52 having thoughts about cutting down the work I’m doing. We simply can’t afford for people even beginning to think like that.’

Hearing that her tax bill was likely to be so huge was a shock, she admits, although she had been aware of the issue for some time. ‘I first became consciously aware of it when a colleague of mine had a large tax bill and remortgaged their house. That was quite shocking. I think it’s fair to say that I’ve been anxious about it and I’m aware that there’s a great deal of anxiety among my colleagues, which has meant, for instance, that it’s very difficult to get people to take up extra sessions to do clinical work, but also to do important educational roles. We are struggling to get applicants for these.’

It felt ‘unreal’ to be told of her own likely bill, she says. ‘There was a sense of disbelief. I was aware that people had had big tax bills, but I’d never heard of anybody having a tax bill as large as mine. I was anticipating it would be likely to be half that at most.’

Not in her interests

It’s a big thought to contemplate taking out a new mortgage or bank loan in her 50s, particularly with children still in education. But the alternative – using ‘Scheme Pays’ to ‘borrow’ money from her pension fund – doesn’t appeal either. ‘Part of the difficulty is that it’s very hard to work out what the effect of that would be long term because there is interest payable on that, so I’m waiting to get good financial advice to find out what's best for me to do.’

Ironically the large bill could in part be owing to her attempts to ‘catch up’ with colleagues who had been applying for clinical excellence awards over a longer period – which meant she had a large increase in pay in a short time, with a corresponding effect on her pension.

‘I worked part time earlier in my career. I’m very aware of the gender pay gap. So earlier in my career I had to focus on my core clinical job and family commitments. But since my children have grown older, I’ve moved to full time at work, and have worked considerably hard to contribute to the wider benefit to the NHS through my national roles.

‘I really don’t have a problem with paying tax,’ she stresses. ‘It’s really important that people like me do pay high rates of tax because that’s what funds the health service, our education system – I’ve no issue with that at all. The issue here is the unpredictable nature of it and the fact that it’s very hard to anticipate, and the fact that it’s impacting on the workforce whereby people are very stressed about it, but they are also making decisions to cut down their work. We just can’t afford that at the moment in the NHS.’

Big bill

She, like many others, is weighing her own options carefully. ‘I don’t know what I’m going to do,’ she says. ‘Cutting down on work feels to me to be a morally reprehensible course of action given the service demand. But at the same time the debt that I accrued in this year is equivalent to the biggest debt I ever had in my life, which is my mortgage. I’ve worked hard to provide for my family over the years, and will be forced to make decisions that protect my assets and my income in my old age. The worry of another big bill is preying heavily on my mind, but I really don’t know what I’m going to do. Clearly I need to take very good financial advice.’

The BMA has been leading the campaign against changes to pension legislation introduced in 2016, which have led to doctors facing large and often unexpected bills relating to their pensions.

This has included writing to successive prime ministers and other senior policy makers laying bare the extent of the problem and calling for urgent action.

A BMA survey published in August found that thousands of GPs and hospital consultants have reduced their working hours, and thousands more are planning to cut back because of the changes.

The UK Government is reviewing the changes and has proposed some amendments, including allowing staff and employers to reduce the amount paid into pension pots.

But the BMA has said the proposed changes are just a ‘sticking plaster’ and would not solve the issue.

The BMA is also supporting its members to ensure they are aware of the tax implications of the annual pension allowance, and making available tools so that they can assess their own particular circumstances.