Potential Changes to Annual Allowance 2019/20
Recent information in the press suggests that the NHS in England will be issuing a proposal to pay pension savings tax charges for Doctors who exceed the annual allowance in 2019/20 in an effort to encourage Doctors to increase their hours without the potential additional tax burden.
Currently there are no specific details of how this would work in practice, however, the indications are that for relevant NHS pension scheme members with a tax charge in 2019/20 they should make an election for the scheme to pay their tax and the NHS would then make good the amount needed by the pension scheme to retain the individual’s level of pension benefits at retirement as if the election had not been made.
What we do not know yet is how this would affect the individuals who are effectively having a tax liability paid for them. Ordinarily, where an employer provides a cash benefit, this would be subject to tax and national insurance.
Would the money paid into the individuals pension be considered an additional employer contribution? In which case, would this then also impact the pension growth or the calculation of the tapered annual allowance.?
The information currently available confirms that the proposal is intended to encourage Doctors to take up extra work due to the increasing demand over winter in both hospitals and general practice.
There are no signs that this stop-gap measure will be available to all NHS pension scheme members affected by annual allowance pension tax charges.
Currently the suggested proposal is only for Doctors in England and we do not yet know if this will be adopted by other jurisdictions.
There are also no details of how this proposal would be administered.
Further information on this is expected to follow soon.