The Department of Health and Social Care (DHSC) is consulting until 11 November 2019 on a new set of proposals to address the problem of pension tax charges faced by senior NHS doctors who breach their tapered pensions annual allowance.
The government is concerned that high-earning clinicians are reducing their workload, turning down extra work and responsibilities, or retiring early, with consequences for NHS capacity and delivery of NHS services. The new proposals replace the ‘50:50’ option set out in an abortive consultation in July.
DHSC therefore proposes to amend NHS pension scheme rules to provide a new ‘flexible accrual’ facility. This will allow eligible members to:
choose before the start of each scheme year (1 April) a personal accrual level in 10% increments and pay correspondingly fewer employee contributions, for example, 50% accrual with 50% contributions, setting their accrual at a personal ‘safe’ level that is unlikely to lead to a tax charge; and
fine tune their pension growth towards the end of the scheme year by updating their chosen accrual level when they are clearer on total earnings, for example, go from 50%:50% to 60%:60%.
The updated accrual level would be higher than initial level and have retrospective effect from the start of the scheme year. Contribution arrears from the higher accrual level would be payable by the member and employer before the end of the scheme year.
The consultation document notes the benefit of offering clinicians a structural approach within the scheme rules through which they can reduce their tax liability, rather than resorting to a variety of informal arrangements.
The Department of Health and Social Care (DHSC) is consulting until 11 November 2019 on a new set of proposals to address the problem of pension tax charges faced by senior NHS doctors who breach their tapered pensions annual allowance.
The government is concerned that high-earning clinicians are reducing their workload, turning down extra work and responsibilities, or retiring early, with consequences for NHS capacity and delivery of NHS services. The new proposals replace the ‘50:50’ option set out in an abortive consultation in July.
DHSC therefore proposes to amend NHS pension scheme rules to provide a new ‘flexible accrual’ facility. This will allow eligible members to:
choose before the start of each scheme year (1 April) a personal accrual level in 10% increments and pay correspondingly fewer employee contributions, for example, 50% accrual with 50% contributions, setting their accrual at a personal ‘safe’ level that is unlikely to lead to a tax charge; and
fine tune their pension growth towards the end of the scheme year by updating their chosen accrual level when they are clearer on total earnings, for example, go from 50%:50% to 60%:60%.
The updated accrual level would be higher than initial level and have retrospective effect from the start of the scheme year. Contribution arrears from the higher accrual level would be payable by the member and employer before the end of the scheme year.
The consultation document notes the benefit of offering clinicians a structural approach within the scheme rules through which they can reduce their tax liability, rather than resorting to a variety of informal arrangements.
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