One of the key reasons doctors can afford to retire early is their extraordinarily generous pensions.
Typically, doctors on a six-figure salary can expect to receive a pension income of about £50,000 a year at the age of 60.
This is based on their years of service and salary and is paid on top of a cash lump sum of just under £150,000.
GPs can take their pensions before 60 at a reduced rate.
For every year they retire early, the NHS deducts 5 per cent. So if a GP quits at 58 their retirement income might fall from £50,000 to £45,000 and the lump sum from £150,000 to £137,500.
This penalty, which remains in force throughout their retirement, is supposed to keep senior doctors in work.
But experts say it’s having little effect for several reasons.
At its most obvious, early retirement means more leisure time, free of the stress of managing a busy surgery. This becomes extremely tempting when GPs discover the hidden financial perks of leaving full-time employment.
The chronic shortage of locums in the NHS means semi-retired GPs can easily find work a few days a week to boost their incomes. And more importantly, retiring two years early can even make a doctor £118,000 better off, according to Gary Smith, of financial planning firm Tilney.
This is because GPs normally pay 14 per cent of their salary into the NHS pension scheme every year. As soon as they retire these payments stop. So someone who left a £100,000 post at the age of 58 would save two years of pension contributions – or £28,000.
Additionally, they would have collected £90,000 from their pension plan without paying any National Insurance. The benefit of instead working full-time until the age of 60 (other than the high salary) would have been an extra £5,000 a year in retirement and a £12,500 lump sum.
Yet it would take more than 20 years of receiving these extra payments to make up for the cash the early retiree would have collected.
The final incentive for GPs to retire early is the potential tax blow they face.
In the eyes of the taxman, a £50,000 pension income and £150,000 lump sum from the NHS is equal to a £1.15 million pension pot in the private sector.
This is above the lifetime limit for pension saving. Under tax rules, workers face a penal charge of between 25 per cent and 55 per cent on anything above £1 million.
According to Mr Smith at Tilney, the effect would be to reduce a 60-year-old GP’s pension income to £48,125 a year.