The Pensions Ombudsman has upheld a complaint against the NHS Business Services Authority and Primary Care Support England after they “negligently” failed to provide a GP with tax information and delayed the handling of his pension contributions.
Dr N had complained to the ombudsman that the tax charge applied to his pension commencement lump sum could have been avoided, or significantly reduced, if NHS BSA and PCSE had acted on his requests to update his pensionable pay figures before his retirement.
Both NHS BSA and PCSE have been instructed to repay the claimant £1,919.73 each towards the lifetime allowance charge that was incurred, as well as a further settlement to compensate for the distress caused.
It follows a series of cases of NHS Pension Scheme members facing costly tax charges, while staff have increasingly been opting out of the scheme.
In November 2016, Dr N emailed PCSE explaining that NHS BSA had not been updated with his correct pay. His actual earnings were £95,000, while NHS BCA was only aware of earnings of £28,000.
PCSE then confirmed receipt of the updated pay information but said it needed to identify the money in NHS England’s bank account before it could be allocated to his record, adding NHS BSA would not be updated until the entire year was reconciled, and Dr N’s 2016-17 self-assessment form was submitted.
In response, Dr N asked for his contributions to be brought up to date with NHS Pensions as soon as possible to avoid problems with tax.
Dr N said he was concerned that his superannuation contributions for the 2016-17 financial year have not been brought up to date, which was “obviously relevant in relation to the LTA”.
In January 2017, Dr N retired with a pension commencement lump sum of £225,300. The value of Dr N’s benefits for testing against the LTA exceeded the allowance, but he held enhanced protection against any LTA charges.
However, NHS BSA, after receiving a revised pensionable pay figure from PCSE, said the pension lump sum was now worth £234,900 — some £9,600 more than previously calculated.
A letter from NHS BSA in March 2018 stated Dr N’s enhanced protection eliminated any LTA charge on the annual pension, but it did not increase the pension lump sum that could be taken.
NHS BSA said the additional lump sum was therefore an unauthorised payment and was liable for a tax charge of 40 per cent, worth £3,840.
After the case was raised with the Pensions Ombudsman, it concluded that while Dr N had incurred a tax liability, he should have been informed of the consequences in advance so that he could mitigate or minimise the payment. The situation was worsened by PCSE failing to update his records in good time.
Ombudsman Anthony Arter said: “NHS BSA had no duty to actively advise Dr N how to best access his pension.
“However, it did owe a duty of care to ensure that its answers to specific questions about the availability of enhanced protection and possible LTA charges, where it was clear he intended to rely on it, were accurate and complete.