TaxMay 24 2021

NHS staff turn to scheme pays as taper issues rumble on

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NHS staff turn to scheme pays as taper issues rumble on

“Despite the deadline for doctors to apply for 2019/20 scheme pays having been extended, it is still important that doctors who think they might have exceeded the annual allowance seek financial advice so that the best course of action can be agreed. 

“I am surprised to see only 2,000 people having applied for scheme pays at present and expect there to be thousands of staff who would benefit from applying for scheme pays so they can latterly apply for the NHS Annual Allowance compensation scheme.”

Crossley said an “easy fix” would be to introduce a four-year timeframe for scheme pays election to give NHS workers “ample time to find out about any liabilities and organise their finances in a way that means they are not penalised in this way”.

NHS Pensions offers both mandatory and voluntary scheme pays facilities. Mandatory scheme pays is only available if the growth in the members’ pension benefits is more than the standard annual allowance.

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.

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.

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