Pension flexibilities proposed for senior NHS clinicians

Senior clinicians in the NHS Pension Scheme could be aided in adjusting their retirement savings to fit within their tax-free allowance by new flexibility proposals from the government.

The Government Actuary’s Department (GAD) and the Department for Health and Social Care (DHSC) worked together to provide scheme members with increased flexibility for the management of their benefits and the tapered annual allowance taxation structure.

A consultation carried out by the DHSC explored a range of flexibilities, including giving the members an option to accrue at a flexible accrual rate in exchange for paying reduced employee contributions.

These are intended to allow enable senior clinicians to continue to work in the NHS while tailoring their pension scheme accrual to the level they wished to achieve, allowing for pension tax implications.

The findings from this consultation fed into a review of the annual allowance taper, with an increase in the earnings threshold for the tapered annual allowance from £110,000 to £200,000 announced at the Budget on 11 March 2020.

Aegon head of pensions, Kate Smith, said: “Potential pension tax charges, in the form of the dreaded tapered annual allowance, have led to some senior clinicians reducing their NHS hours or leaving the NHS early. In the current crisis the NHS needs all the doctors and other medical staff it can get.

“This has mobilised the government into finding a workable solution for senior clinicians in the NHS Pension Scheme on top of the increases in the thresholds for the tapered annual allowance announced in the March Budget.”

Smith added that it was “imperative for affected NHS staff to get financial advice” if the proposed flexibility is offered, as some uncertainties would remain and individuals could still receive a tax bill as they “may not know their earnings until the tax year has ended”.

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