Firstly to all NHS frontline workers – a massive thank you!
However as the volume of overtime undertaken by frontline NHS staff increases exponentially in response to the Coronavirus crisis questions over the impact on the pension and taxation issues facing doctors are beginning to appear.
Changes to the tapered annual allowance announced at the March 2020 Budget and are expected to lift all but the highest paid out of the “taper trap”. These are due to take effect from 6 April 2020. In view of the impact the exceptional amount of additional shift work is having on the threshold income of healthcare professionals right now, it’s worth highlighting the interim measures put in place for clinicians who may face an annual allowance tax charge in relation to tax year 19/20.
We’ve not yet seen a Government response to its 2019 consultation on increased flexibilities for the NHS pension scheme, although the Chancellor has confirmed that proposals to allow senior clinicians to receive extra pay in lieu of pension contributions will not be taken forward.
It may be that the dust gets brushed off some of these previous proposals, if it turns out that the overhauled tapered annual allowance doesn’t go far enough to protect the most dedicated NHS staff working the longest hours from an annual allowance tax charge.
In a widely-anticipated move, the Government is encouraging retired health and social care professionals to return to the NHS to join the fight against Covid-19. In order to prevent post-retirement employment having disadvantageous consequences for the pension income of such individuals, emergency amendments to NHS pension regulations have been tabled.
These form part of the Coronoavirus Bill 2019-21 which received Royal Assent on 25 March 2020. The amendments (which the Government will have the power to implement immediately or retrospectively) apply across the United Kingdom and have 3 effects:
It should be noted that there is no proposal to amend regulations prohibiting pensionable re-employment of 1995 section retirees. Any clients who have retired and drawn 1995 section benefits will therefore be able to return to the NHS, but will not be able to resume pensionable employment under the NHS pension scheme. Employers will need to enrol returners who are eligible workers into an alternative pension scheme.
Please also note that these measures are temporary. The Government has stated that a six month notice period will be given to staff and employers before they are disapplied.
Recent social media chatter suggests there’s concern amongst health care professionals who have made taxation-related decisions to opt out of the NHS Pension Scheme, that their loved ones will no longer be entitled to any scheme benefits in the event of their death. So clients need reassurance that this is not the case.
Although the loved ones of individuals who’ve opted out will no longer be entitled to death in service benefits if the deferred member passes away, they remain entitled to death in deferment benefits. These include a lump sum death benefit and both eligible adult survivor’s and eligible children’s pensions. Though Death in Service benefits are often small in comparison to the lifetime needs of loved ones left behind.
If you are concerned about the level of cover you currently please do get in touch as cover can be put in place fairly quickly.
Jon Doyle is Founder and Financial Planner at Juniper Wealth Management. Advising clients since 2008 he has guided clients through good time, bad times and the ugly. With a clear vision on how advice should be delivered and strong opinions on how we should be investing money in order to live the life we want to live free from money worry.