The government has extended the NHS scheme pays deadline by three months to stop workers being hit by significant unexpected tax bills as a result of the tapered annual allowance.
The Department of Health and Social Care (DHSC) confirmed the voluntary scheme pays deadline for the tax year 2018/19 has been extended until October 31, 2020 in order to support frontline workers who may struggle to pay an unexpected tax bill during this time.
The deadline is the date by which GPs who want to have an annual allowance pension tax liability settled by way of scheme pays must have submitted their election form.
Scheme pays allows savers to settle charges of more than £2,000 through the pension fund without needing to find funds upfront.
A DHSC spokesperson said: “We want to ensure every member of our NHS frontline gets the support they need during this unprecedented time.
“The deadline of NHS scheme pays has been extended until 31 October 2020 and will be reviewed again at the end of July.”
The taper issue
The tapered annual allowance 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 rules have forced senior clinicians and other high earning public sector workers to either leave their pension scheme, cut down on their working hours or retire early to avoid punitive tax bills.
While the Budget in March lifted the ‘adjusted income’ and ‘threshold income’ levels under the tapered annual allowance by £90,000 for the 2020/21 tax year, there is still a legacy of annual allowance issues for many doctors.
Doctors who are taking on extra shifts due to the current pandemic are at risk of being hit with large tax bills because of continuing issues with this charge.
Quilter lobbies government
The DHSC’s decision to extend the scheme pays deadline comes after Quilter sent an open letter to the chancellor, secretary of state for health and social care and economic secretary to the Treasury, which called for an extension of at least six months.
The firm also suggested a wider NHS scheme pays deadline, which would allow members to make retrospective elections within the same four-year period that is available for those who are able to amend an existing election.
Rachael Hall, head of medical services at advice firm Sandringham Medical, agreed the government could go further as doctors will still feel the pressure to meet the deadline.
Ms Hall said: “The extension seems reasonable but three months doesn’t go far enough to reduce ongoing annual allowance pressures on doctors, especially those who have worked tireless hours in overstretched services, who may be facing bills disproportionate to previous years, as a result of fighting Covid-19.
“Any members, who are unable to calculate their annual allowance charges prior to July 31, can already make an estimated scheme pays election, for a nominal sum of £1, which can be amended up to four years later. It would therefore make sense to run both deadlines on a four-year timescale.”
Three months doesn’t go far enough to reduce ongoing annual allowance pressures on doctorsRachael HallShe added: “Under the current system, GPs are unable to meet these deadlines, having only received this information a year or so later, due to delays caused by laborious operational processes.
“The overall annual allowance system and ongoing administration of GP pensions, needs a complete overhaul as pension savings statements are often unreliable and most GPs do not even have access to a basic pension statement (usually available via the total rewards system).
“This means that GP’s are either opting out of the scheme in droves, which can have catastrophic effects on their final retirement pensions and they don’t even know it; or they will be forced into early retirement, which then exacerbates the existing shortages in GP Practice.”
Graham Crossley, head of development of Quilter’s Medical and Dental advice business, said: “As they deal with this unprecedented crisis, many NHS staff are working extra hours and are understandably time poor.
"And even if they did have time it’s absurd to expect that NHS staff will be in the mindset to focus on their finances.
"Doctors are risking their lives and the least we can do is ensure they are not being financially penalised for it.”
Jon Greer, head of retirement policy at Quilter, added that some doctors are only now realising they have annual allowance liabilities for historic tax years.
Mr Greer said: “As the NHS scheme pays deadline has passed for those tax years, doctors have fewer options to settle the annual allowance charge and some are having to resort to take on significant debts.
“Extending the deadline for scheme pays would at least ensure all doctors are given adequate time to plan and are not adversely impacted by pension tax rules while they are focused on fighting Covid-19.”
amy.austin@ft.com
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