Hospital Dr News

NHS Pensions: guidance outlines measures to reduce impact of pension taxation

NHS Employers has released new guidance outlining measures that can be taken to reduce the impact of pension taxation.

The guidance enables employers to apply the Prime Minister’s ‘permission’ to implement a number of optional temporary measures locally.

The measures outlined can be used during the 2019/20 financial year to support staff and service delivery, ahead of any changes to the NHS Pension Scheme or wider tax system.

The guidance includes advice on:

  • the importance of independent financial advice and guidance
  • existing flexibilities to enable employees to remain in the NHS Pension Scheme
  • possible arrangements for employees who decide to opt out of the NHS Pension Scheme

All local arrangements should be reviewed from April 2020, as new approaches may become appropriate following the implementation of scheme changes.

Last month the government announced it would act to introduce pension changes to enable senior clinicians to take on additional clinical activities without incurring unexpected pension tax bills.

Danny Mortimer, chief executive of NHS Employers, said: “Our guidance is intended to help employers provide staff with the local flexibilities they need during this financial year. The optional measures outlined in our guidance may be implemented by employers to support staff and service delivery until scheme changes are introduced.

“We await the upcoming consultation on scheme flexibilities with interest and will be submitting a response to represent the views of employers. Our members continue to believe that greater scheme flexibilities are needed for all areas of our workforce.”

NHS consultants earning above £110,000 have been hit with significant pension tax bills, as their pension contributions have fallen foul of the annual allowance taper. Many have had to compromise their pensions by making them pay for the tax bills, or use life savings or remortgage their homes.

Significant numbers have reduced their hours of work to avoid the pension tax bills in the future.

Niall Dickson, chief executive of the NHS Confederation, said: “Operations are being delayed and cancelled. Doctors and other senior staff are reducing their hours and, in some cases, leaving the NHS – all because of a failure to think through the full consequences and effects of changes to taxation policy. We need a solution for the sake of patients and our staff and we need it now.

“This guidance from NHS Employers, which is part of the NHS Confederation, will be welcomed by staff, employers and patients because it will increase awareness of the different options available now to support staff during this financial year.

“However, problems for patients will intensify without government reform of the annual allowance taper and the introduction of new flexibilities into the current NHS pension scheme arrangements.”

He added that the Prime Minister has assured him that the Treasury will now review how the annual allowance taper operates to support the delivery of public services such as the NHS.

Matt Hancock, Health and Social Care Secretary, said: “We recognise immediate action is needed to help fix this and minimise the impact it is having on our NHS. Today we are giving trusts the tools they need to grant maximum flexibility to their staff right now, alongside tailored support so every top clinician can continue to care for their patients without worrying about the impact on their pension.”

Read the guidance.

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