Guidance highlights options ahead of pension changes

01 September 2019 Steve Brown

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In August, the government announced plans to enable senior clinicians to vary their pension contributions so that they can take on additional clinical activities without incurring unexpected pension tax bills.  The problems have emerged following the introduction of an annual allowance to limit the amount of tax relief received by higher earners.Niall Dickson

The proposals – not yet published in detail – will be subject to consultation with the aim of being in place from April 20202.

However, these proposals do not fix the problem in the short-term, with hospitals reporting clinicians reducing their hours, turning down waiting list work or even taking early retirement. The new guidance attempts to fill this gap by suggesting measures that can be used during 2019/20 ahead of any changes to the NHS pension scheme or wider tax system.

The guidance stresses the importance of independent financial advice, as individuals’ financial circumstances will all be different. It also describes existing flexibilities that would enable employees to remain in the pension scheme. Possibilities include redefining some elements of pay as non-pensionable or converting old local clinical excellence awards (pensionable) into new awards (non-pensionable). Other options covered include: offering staff time off in lieu instead of pay; use of multiple contracts; and establishing new organisations for service delivery.

The guidance also discusses potential arrangements for employees opting out of the NHS pension scheme.

NHS Employers has also warned that any agreements made locally should be reviewed regularly to ensure national solutions developed and implemented at a later date are taken into consideration.

The NHS Confederation, which hosts NHS Employers, said the guidance would increase awareness of the different options available to support staff during this financial year. But it added that reform of the annual allowance taper and new flexibilities were still needed.

 

‘The prime minister has assured us that the Treasury will now review how the annual allowance taper operates to support the delivery of public services such as the NHS,’ said confederation chief executive Niall Dickson. ‘We will have to see how this will work in practice, but we regard this as a significant move and change cannot come fast enough.’