NHS workers were lionized over the last year or so as coronavirus infection rates skyrocketed and hospitals across the UK were spread thin. Following pressure from certain organisations, the Government elected to ease some of the pressures NHS staff faced by altering pension scheme rules but new analysis showed many workers are to be hit by costly tax obligations.
Quilter, the wealth management company, recently obtained Government figures which showed that 38 percent of NHS staff who exceeded the pension annual allowance in 2018/19 elected for the scheme pays option, well above the 11 percent average seen prior to 2015/16.
This, Quilter argued, illustrated the impact of the tapered annual allowance rules.
The rules allow savers to settle annual allowance tax charges through their pension scheme without needing to find cash upfront.
However, while the Budget lifted the "adjusted income" and "threshold income" levels under the Tapered Annual Allowance by £90,000 for the 2020/21 tax year, Quilter warned there is still a legacy of annual allowance issues for many doctors.
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Following a letter delivered to the Treasury by Quilter, the 2018/19 NHS Scheme Pays deadline was extended to March 31 2022, which gave NHS staff dealing with the pandemic more time to apply for the scheme pays option.
In examining the data, Quilter detailed the figures showed the number of NHS staff who breached the standard annual allowance dropped to 7,576 in the 19/20 tax year from a peak of 24,126 in 16/17, but this was due to a lag in reporting rather than fewer people breaching the allowance.
Quilter detailed it is expected once records are updated this figure will increase significantly.
In December, Quilter sent an open letter to Rishi Sunak urging for the scheme pays deadlines to be extended and the rules to be amended so members can make retrospective NHS Scheme Pays elections within the same four-year time period that is available for those who are able to make amendments to existing elections.
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In response to this, the NHS Business Services Authority (NHSBSA) confirmed last week it would extend the 2019/20 voluntary scheme pays deadline for NHS Pension Scheme members with an annual allowance charge until March 31 2022 to match the deadline to apply for the NHS England & NHS Wales Annual Allowance compensation policy.
Quilter welcomed this news as a "step in the right direction" but it warned there are still a number of members, "GPs in particular", who may not find out about their 19/20 annual allowance liability until after the revised March 31 2022 scheme pays deadline.
Currently, 2,077 NHS workers have elected for scheme pays but on the flipside of this, 7,576 have so far exceeded the standard allowance and there are likely to be many more that have exceeded the tapered annual allowance and as such, there "is a risk that many doctors may miss out on the compensation that they were promised."
Graham Crossley, an NHS pension specialist at Quilter, commented on these findings.
“Despite the deadline for doctors to apply for 19/20 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 2000 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.
“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.”
Full details on NHS pension rules can be found on the NHS's Business Services Authority website.
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