Temporary pension arrangement for NHS staff
05 December 2019
In recognition of the current tax issues surrounding the NHS pension scheme for individuals who work within frontline clinical roles in England, a temporary fix is being implemented to cover the year 2019-2020.
The government has confirmed that the NHS is authorised to pay any NHS pensions tax charges incurred by senior clinicians during tax year 2019-2020. The intention is to avoid further pressures on the NHS during the winter period, which is notoriously busy, by allowing senior clinicians to work extra hours without being penalised and seeing any detrimental effect to their pension.
Reports from the Financial Adviser confirmed that the number of members opting out of the NHS pension scheme were five times higher than the number of opts outs observed in any other public pension fund and this was directly linked to the taper that is imposed on the annual allowance.
The tapered annual allowance decreases the pension allowance for high earners – for every £2 of adjusted income above £150,000, £1 of annual allowance is sacrificed. It was implemented back in 2016 and has meant that certain individuals have had to pay annual tax charges and lifetime allowance tax charges on their benefits. The Treasury is set to review the tapered annual allowance as doctors have vehemently opposed it since its introduction.
In letters between Matt Hancock, the Health and Social Care Secretary and Simon Stevens, Chief Executive of NHS England, Mr. Hancock acknowledges the issue and confirms that it is too urgent to delay until after the general election and authorises a temporary measure to fix the problem for 2019-2020, but for that year only. Mr. Stevens had initially enquired whether certain payments could be made to senior clinicians outside of the pension scheme which was accepted, meaning that there would be no detrimental effect to their pensions.
There was discussion of the fix being extended to include GPs and dentists, but nothing further had been confirmed at the point of publication.
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