In fact the recent government consultation on NHS Pension tax issues confirms this.
If you are a member of the NHS pension and believe you are someone that is most impacted by the Tapered Annual Allowance resulting in a potential large tax bill then you may have options.
NHS Pension tax issues – NHS Employers guidance
NHS Employers has recently published tax guidance for employers so that they can implement their own localised policy.
The guidance pulls together the options currently available for NHS Trusts that can be used this tax year before any changes come into force.
A summary of the options is as follows:
- Being rewarded through non pensionable pay instead of pensionable pay.
- Bonuses, overtime, payments to cover expenses are an example.
- More non pensionable pay will reduce future pension benefits.
- Non pensionable pay will still count towards earnings for Tapered Annual Allowance purposes but may lower your deemed pension contribution.
- Local Clinical Excellence Awards (LCEAs)
- Existing LCEAs are pensionable but any newly qualifying LCEAs issued since 1st April 2018 are non pensionable.
- LCEAs still count towards overall earnings but deemed pension contribution should be reduced.
- Time off in lieu
- You can be offered extra time off rather than pay. You then take this time off during ‘quieter’ periods!
- Time off in lieu can be built up and saved.
- This will not increase your earnings or deemed pension contribution.
- Multiple contracts
- You can opt out of the NHS pension scheme for one of your contracts and stay in via the other.
- Full time contracts can be split.
- All pay still counts towards overall earnings but deemed pension contribution and future pension benefits will be reduced.
- Working via a third party
- Through a Limited Liability Partnership or ‘Chambers Arrangement’.
- Non pensionable income and therefore lower deemed pension contribution.
- Income still counts towards overall earnings.
- Set up costs.
- Potential tax avoidance risks and not recommended by NHS Employers.
- Opting out of the NHS Pension for part of the year
- Lower deemed pension contribution but future pension benefits reduced.
- No death in service cover during opt out period.
- Receiving employer contributions as additional salary
- Opting out of the scheme as above.
- Additional earnings for Tapered Annual Allowance purposes but lower deemed pension contribution.
- Reduction in future pension benefits.
For more details on the options about I urge you to read the NHS Employer guidance.
NHS Pension tax issues – Advice essential
What is clear from the guidance is that any options used by your local employer will be incredibly complex to administer and in order to qualify you are going to need to prove that you have NHS Pension tax issues.
The guidance states that independent financial advice is highly recommended so you do not make any rash decisions that could mean you lose out in the long run.
If you would like to run through the options before you speak to your employer then we would be delighted to offer our services to help you out. We are offering a free 15 minute call. Where you can speak to a Chartered Financial Planner who will run through the above options and decide which might be best for you.
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
