The change to the consultation comes following discussions between the wider workforce and health secretary Matt Hancock, who had pledged to seek views on other ideas to make NHS pensions work better.
Other ideas put forward by the profession to address the issue include removing the current annual limits for practitioners who choose to top-up their pension by purchasing “additional pension” later in the tax year, to maximise any remaining headroom in their annual allowance.
The key issues
While the 50:50 scheme is not a new concept – it has been used in the Local Government Pension Scheme for several years – the increased degrees of flexibility are.
It is possible that it could be a useful option for some – particularly for those who are expecting significant increases in their annual salary and could hit the annual allowance threshold, or for those who do not want to contribute the standard amount into their pension pot so they have more money in their pocket each month.
It is also a useful alternative to opting out of the NHS pension scheme altogether.
The challenge for senior clinicians wanting to take advantage of the scheme will be understanding what their likely pensionable earnings will be in a year.
It is likely that clinicians will have to decide what contribution option to make based on what their projected earnings will be at the start of the year, but this is not always easy.
One way to do this would be to look at your average earnings over the past few years to try to build a reasonable prediction of your likely income.
This might not work, however, for those planning to increase the work they do, or for partners who know a significant change in their business is likely, such as a fellow partner retiring and not being replaced.
The fact remains that the tapered allowance – which affects about a third of NHS consultants and partners in GP practices – will result in more higher earners contributing towards the public purse by reducing the amount they can save into their pensions tax-free.
The BMA had previously asserted that the 50:50 option should just be a short-term measure while wider reform of the pension taxation system was undertaken and has said the new proposal are a “step forward” by government.
Will the proposals mitigate this tax taper?
Some senior clinicians have already started calling on the government to make more wide-sweeping reforms to the taxation of pensions while simultaneously changing the annual and lifetime allowance rules.
