Govt open to NHS pension tax solutions

Govt open to NHS pension tax solutions

The Department for Health and Social Care is asking stakeholders what changes it should make to the rules governing the NHS Pension Scheme to provide “the right balance of incentives and maintain pensions that are fair”.

In the 50-page document published today (July 22) the government, which has be facing requests to scrap the tapered annual allowance as it has been penalising doctors, asked if the solution for the problem should be achieved within the pension scheme, and if so if this remedy should be applied to all clinical staff.

As announced by the Health and Social Care secretary Matt Hancock in June, the government is proposing a new pensions option, which will allow doctors to build their NHS pension more gradually over their career without facing large tax charges.

The introduction of a 50:50 option would allow clinicians to "halve their pension contributions in exchange for halving the rate of pension growth". However, the British Medical Association stated that the 50:50 proposal will not remove the incentive for doctors to reduce their working hours.

The government asked today if this option created “the right balance of incentives for clinicians to continue to provide the services the NHS needs,” and if not, in what other ways the 50:50 proposal could be developed further.

Stakeholders are also invited to express their views on any other changes to the NHS Pension Scheme that would make the system fairer.

Concern about doctors' pensions has increased significantly since the introduction of the tapered annual allowance in 2016.

This gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

The tapered annual allowance means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

It emerged in December that the number of members leaving the NHS Pension Scheme was five times higher than that seen by other public pension funds.

The government stated that whatever final proposals are adopted, it remains concerned that, even with the important further flexibilities, “dealing with the complexities of the interaction between tax, pay, pensions and additional work for the NHS are a burden on hard working staff”.

This is why the “document seeks views on how employers, unions and the pension scheme itself can provide more effective support to individuals in managing them”, it added.

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