There has been considerable press exposure surrounding the NHS pension in recent weeks, including the increase in the employer’s pension rate, the possible 50/50 partial scheme, the ongoing administration issues, and the ‘Separate Cash Payment’ scheme.
Many of the potential changes in the pension scheme relate to, or are aimed at, alleviating the Annual Allowance issues, and the resulting additional tax charges, which are affecting a considerable number of GPs, consultants and other healthcare professionals.
For the 2017/18 tax year onwards, the ‘Scheme pays’ facility now allows individuals to request that the scheme pays the full tax charge arising as a result of excess NHS pension growth.
Previously this had been subject to several restrictions, including where the GP in question had a ‘tapered’ annual allowance level below the standard £40,000 per annum; then only the tax charge arising on growth above the standard allowance level was met by the scheme. The remainder needed to be met personally.
However, time is rushing by and if you want to make the necessary election, there is a deadline of the end of July in the calendar year following the end of the relevant tax year to elect for ‘Scheme pays’. So, for 2017/18, the deadline is 31st July 2019.
Therefore, if any GP partners are concerned that they may have breached their annual allowance, after allowing for any possible tapering, the first thing to do is to request their NHS annual allowance pension savings statements from NHS Pensions. Please note that there can be up to a 12-week wait to obtain the statements. Please also note that both the 2017/18 and 2016/17 pension statements should be requested (unless you’ve already received the 2016/17 statements), to ensure that the correct carry-forward allowances are used in the calculations, especially if the allowances were affected by the tapering rules in the 2016/17 year.
If the correct information isn’t available, an estimated election can be made to beat the deadline date, which can then be amended up to three years after the original deadline, so the deadline for changing an amended election for 2017/18, is 31st July 2022.
Please note, for younger GPs in particular, the use of ‘Scheme pays’ may lead to a significant reduction in overall pension, and specialist advice should therefore be taken to ensure that it’s the right move for you.
Author: Ed Paull, Medical Director from Lentells