Calls for NHS scheme pays window to be extended retrospectively amid low take-up

Industry experts have called for the voluntary NHS scheme pays deadline to be extended to allow members to make a scheme pays election within a four-year timeframe, amid concerns that some may not be aware of their annual allowance liability until after the deadline.

Figures obtained by Quilter revealed that 38 per cent of NHS staff who exceeded the pension annual allowance in 20189/19 elected for the scheme pays option, “well above” the 11 per cent average seen prior to 2015/16.

The data also revealed that the number of NHS staff who have breached the standard annual allowance has dropped to 7,576 in the 2019/20 tax year, compared to a peak of 24,126 in 2016/17.

Quilter clarified, however, that this was due to a lag in reporting, rather than fewer people breaching the allowance, predicting that this figure will increase “significantly” once records are updated.

Furthermore, whilst the NHS Business Services Authority has extended the scheme pays deadline for a second year amid the pandemic, Quilter warned that a number of members,
particularly GPs, may not find out about their 2019/20 liability until after the revised 31 March 2022 deadline.

Currently, just 2,077 of the 7,576 people who have breached the allowance in 2019/20 have elected for scheme pays, with Quilter warning that there is a risk that many doctors may miss out on the compensation they were previously promised.

Quilter NHS pension specialist, Graham Crossley, commented: “After an incredibly difficult year for the NHS there now seems to be light at the end of the tunnel in respect to the pandemic in the UK.

"However, tax issues related to pensions persist and more still needs to be done to support senior clinicians in respect to their pension tax obligations.

“Significant numbers of doctors are only just finding out that they have annual allowance liabilities for historic tax years due to a lag in reporting. As the NHS scheme pays deadline has passed for these tax years, doctors have to pay these liabilities themselves and take on significant debts to do so."

Crossley emphasised that 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," he continued.

“An easy fix to avoid this in the future is to enable hardworking medical professionals to make a scheme pays election within a four-year timeframe, thus giving them ample time to find out about any liabilities and organise their finances in a way that means they are not penalised in this way.”

Quilter also wrote to the government in December to call for the rules to be amended to allow members to make retrospective scheme pays elections within the same four-year timeframe that is available for those who are able to make amendments to existing elections.

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