Temporary pension rule relaxations for those returning to help fight the outbreak of COVID-19
24 April 2020
A letter sent from the Economic Secretary, John Glen, to the Minister of State for Crime and Policing, Kit Malthouse, discusses the temporary pensions tax changes for those returning to roles in the public sector, who have a protected pension age, as they support the government’s response to coronavirus.
The letter confirms intentions to temporarily suspend tax rules that would ordinarily reduce pension income for individuals aged between 50 and 55, for those who have recently retired but are returning to take on roles in order to support the UK in its fight against COVID-19. Without the changes, the pension income of affected individuals could be reduced so much that their net of earnings, plus pension income, would not exceed their earnings prior to retirement. Additionally, they may see negative tax effects on their pension benefits. As a result of the temporary amendments, individuals such as police officers who return to work will not be financially penalised.
The measure has been designed to encourage individuals to return to positions that will help the government response to coronavirus, whilst ensuring that there is no adverse tax impact on their pension. This will mean that public services are protected at this crucial time, and the temporary rules will initially apply in respect of payments made in the period from 1 March 2020 to 1 June 20202. The time limit will be monitored and kept under review,
HMRC will provide detailed guidance on this matter, but the measure will only be applicable to those returning to work due to the coronavirus outbreak, particularly for workforces such as the police. This is not a general lifting of the restrictions and only applies to certain individuals.
The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.