NHS England recently announced to the press that they intend to pay our NHS clinicians annual allowance charges for the 2019/20 tax year. On the face of it, this should be good news – so why are our clinicians concerned? And, what’s motivated NHS England to take this unprecedented step?
Fundamentally, NHS England is concerned our clinicians are reducing their hours to avoid punitive tax charges and a looming tax bill! This comes at a time of year when the demands on the NHS are very high.
A short-term fix to help the NHS through the winter
To encourage clinicians to increase/maintain their hours during the winter months the NHS is promising that they won’t have to pay any annual allowance tax this year. At least that’s what the headlines state.
However, our understanding is that the tax will still be calculated but it can be rolled into the future using the Scheme Pays Election. The NHS will then reimburse our clinicians so they ‘won’t be left out of pocket’ – so they tell us!
The concerns we are hearing fall into 5 main areas:
1. The first issue is this “fix” is merely treating the symptoms, not the root cause. The issue remains that many medics won’t be aware they have a tax liability until after the tax year-end. Often the tapering of the annual allowance happens unwittingly for ‘high earners’.
Those doctors that are aware of the issue are left worrying with limited options open to them to avoid the charge as figures are not available until after the event.
In the recent past, some high earning consultants have ‘hokey-cokeyed’ but this is less than satisfactory. The Government has announced that changes are forthcoming to address opting in and out of the NHS pension scheme as from next April, but as yet they have not released details. Perhaps they have other things on their minds? Until those changes come into effect this action is really just putting a plaster on a cut that needs stitching.
2. The general election may lead to a new government and many are concerned whether the new leader would honor the arrangement being promised by the current ministers. For some doctors being charged retirement is still a long way off – there may be several governments between now and then!
3. The proposed system is highly discriminatory as it currently only deals with the clinicians in England, but not Wales – or indeed other civil servants or non-medical NHS workers who may face similar issues. The government has already found themselves in court over similar pension proposals in the past. Some clients are concerned that this decision by the NHS could still face a challenge from the government (after a cold and busy winter ….).
4. There is also concern about the administrative burden this will place on the NHS pensions agency. It will require them to identify the annual allowance for the specific tax year and rebate the costs back into an individual scheme many years after the event. The pensions agency is already under significant pressure, so how will they be able to guarantee this happens in a timely and accurate manner?
5. What if you carry out private practice and it’s this private income that gives rise to your annual allowance being tapered? Can we assume you would still be entitled to the annual allowance tax deferment? It really isn’t clear.
Their plan is looking a little murky, to say the least!
We are specialists and work hard to keep abreast of developments to help our clients plan as effectively as possible… however, this is a very complex area! We know there is a genuine mistrust of the bodies involved and wonder if this ‘quick fix’ will stand the test of time – or confuse and cause further anger?
2020 is set to be a year to remember but possibly not in the way everyone would hope.
Pensions tax is a complex subject and our clients often have unanswered questions regarding the new NHS Annual Allowance Policy 2019/20. The NHS England FAQ page for staff may help with any queries you may have.
We will also endeavor to keep you up to date with the changes and their implications. However, if you feel you need a personalised view on how these changes will affect your plans contact your Legal and Medical Advisor to arrange a chat.
Are you concerned about how NHS England will implement these changes? Let us know by adding a comment below.