Following a public consultation on NHS pension schemes, the government has confirmed a temporary measure which will compensate senior clinicians for any reductions in pension benefits incurred as a result of the tapered annual allowance, introduced in 2016.

The emergency measure will settle annual allowance tax charges for the 2019/20 tax year whilst the government finalises details of a reform.

An urgent operational necessity

The proposal, deemed an ‘urgent operational necessity’ is in response to the detrimental and disproportionate effect the tapered annual allowance is having on higher earners in NHS pensions schemes, which lowers the thresholds at which people have to pay tax on their pensions contributions and reduces the amount earned overall.

Amid concerns workers were reluctantly forced to reduce their sessions in order to restrict these charges, Matt Hancock, Secretary of State for Health and Social Care has now confirmed arrangements to implement a fundamental tax reform which will compensate high earners for any reduction in their pension benefits. It is hoped this will prevent any detrimental an impact on public services.

With the NHS facing a staffing crisis, senior healthcare professionals will now be able to work additional shifts, safe in the knowledge they won’t be liable for charges.

A radical overhaul?

The proposal addresses the issue with tapered allowances temporarily, but there are calls to scrap the taper entirely, with pension experts suggesting it is the only viable, long-term solution. Critics are also calling on the government to reform the pension tax relief system for all high earners to ensure a fair system, suggesting doctors are receiving preferential treatment.

The government is yet to finalise details of the reformed pensions tax scheme for GPs, but it has confirmed appropriate measures will be implemented that will prevent senior professional incurring large tax charges.

Keeping you up to date

We will issue any further updates in due course, but if you have any questions regarding the tax implications of pension schemes, whether NHS of not, please get in touch and we will be glad to help.

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