16 Dec 2019

How a pension rule may affect your NHS care

We often see news headlines where the NHS and pension schemes are in the spotlight, but this is usually to do with the benefits NHS employees will receive, not how it will affect your care.

But, high earning NHS staff, such as Doctors are being dissuaded from taking extra shifts because they could face tax charges on their pensions.

In 2016, the pension taper rule was introduced. This meant that unlike the majority of the population who could put 100% of earnings up to £40,000 into their pension each year, higher earners contribution allowance gradually reduces down to just £10,000 per year.

Fraught with problems, the taper calculation relies on you knowing your taxable earning for the year. This can be unrealistic for many people, who may have variable income or bonuses and certainly for those in the NHS who are offered additional working hours.

The Department of Health and Social Care are addressing this problem, planning to introduce measures which will enable staff to have greater control over the value of contributions in to their schemes, and making it more flexible throughout the tax year.

Of course, criticisms are abounding. In the NHS, staff are claiming a ‘postcode lottery’ as it’s up to each employer as to whether the reduction of the employer’s contributions into the pension scheme are paid via other means – i.e. they could still be taking a pay cut

And, what about all the other high earners? Well, in the public sector, they are also considering similar plans for the armed forces, but the private? Unfortunately, a badly designed policy such as the taper doesn’t seem as if it will be scrapped any time soon.