I have received a number of emails NHS pension debate, which took place on 2 April 2019.
To hear that NHS staff may seek to limit or reduce their NHS commitments is, of course, troubling. The Government has stated that it recognises pension tax considerations will contribute to decisions by some senior clinicians to retire early, or to reduce their NHS commitments. For those who wish to remain in the NHS pension scheme, it is recognised that the annual allowance can be a disincentive to take on additional work and responsibilities.
Therefore, at the request of the British Medical Association, the Government has extended the scope of the voluntary NHS “scheme pays” facility to cover the payment of tax charges from breaches of the tapered annual allowance. Alongside this, the facility has also been extended to cover tax charges of less than £2,000, which means that, from the 2017-18 tax year, a member can elect for the scheme to pay 100% of their annual allowance charge to HMRC on their behalf.
At present, the NHS pension scheme applies an interest rate to the charge paid on the member’s behalf. That charge is deducted from the capitalised value of the pension at retirement, with the interest rate set at the scheme discount rate. It may be the case that for some younger clinicians, with many years before retirement, this might influence the attractiveness of the “scheme pays” facility. As such, the Government has promised to look at potential further measures, as the impact of public sector pay, and pensions policies, are under constant review.
In the debate, Jackie Doyle-Price MP, Parliamentary Under Secretary of State for Mental Health, Inequalities and Suicide Prevention, explained that the annual allowance operates across all pension schemes in both the public and private sectors and that the Government keeps this under review to ensure that the benefit of tax relief on pension scheme contributions remains affordable. The Minister stated:
“It is in fact one of the most expensive tax reliefs in the personal tax system.
In 2015-16, income tax relief and employer national insurance contributions relief cost the Exchequer around £50 billion, with around two thirds going to higher-rate taxpayers. That is an important point to bear in mind, because we need to ensure that our tax system is progressive and managed efficiently. We will want to look at tax reliefs that favour the highest-rate taxpayers to ensure that our overall burden of tax is appropriate.”
To ensure that the benefit the wealthiest pension savers receive is not disproportionate to that of other pension savers, the Government restrict the amount of tax relief available. The annual allowance does not taper below £10,000, and fewer than 1% of pension savers will have to reduce their saving or face an annual allowance charge because of this policy.
The issue of the current NHS pension scheme is a complex subject that will have to be kept under review, in recognition of the fact that it influences the behaviour of NHS staff. However, the Government does not believe that there is a case for exempting high earning NHS staff from a tax measure that is intended to apply to high earning individuals. Nevertheless, the Government has been clear that it wants to retain the best and most qualified staff in the NHS, and recognises that it needs to ensure that the British tax and pension benefits system does not stand in the way of delivering the best possible NHS service.
At the May 2015 General Election, David was re-elected as the Member of Parliament for Clwyd West, with an increased majority of 6,730.