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Interim Remedy For NHS Pensions

Interim remedy for NHS pensions

Simon Stevens, CEO for the NHS, has released a letter confirming that previously suggested solutions to the NHS pension issues surrounding breach of the Annual Allowance have not prevented senior clinicians  from reducing their hours or refusing additional commitments, leading to NHS shortages on a critical scale.

The issues arise from the inflexibility of NHS pensions, which mean that senior medics are involuntarily breaching the pension Annual Allowance by a big margin and are being faced with tax charges in the tens of thousands of pounds.

Stevens has suggested that a long-term solution will not be investigated until the New Year as we focus on the upcoming election but has moved to put in place what he calls an “urgent operational requirement” as an interim measure. The new measure will apply to doctors, nurses and other clinicians who are members of the NHS pension schemes and will cover all savings in the NHS schemes in 2019/2020.

Where individuals are subject to an Annual Allowance charge they can choose that it is paid by the scheme, rather than having to pay large sums themselves via their tax returns. It has also been agreed that the NHS will make a contractually binding commitment to pay members the corresponding amount at retirement, that is, they are compensated with additional salary at retirement which is equivalent to the reduction. The additional salary at retirement will be subject to Tax and National Insurance (NI). The NHS Q&A document states that payments will be grossed-up to cover any NI that would not apply to pension income payments.

Whilst this is an important step in making sure that senior doctors and nurses are not penalised for the inflexibility of the NHS pension scheme, there is no real detail on the process of how it is intended that this will be put into practice nor what the longer-term solution may be. Hopefully this will be revisited as a priority in the New Year, so watch this space for further updates.

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