NHS England announce temporary pensions 'sticking plaster' for dentists
26 November 2019
NHS England has announced that NHS clinicians, including dentists, based in England will not be penalised for breaching the pensions Annual Allowance. The news comes after months of warnings that clinicians are reducing NHS activity as a result of running up large Annual Allowance tax bills in previous years. Reducing activity levels has been seen as a way of both building up a lower NHS Pension and not seeing any reductions to the Annual Allowance available.
We have been lobbying the Department of Health and Social Care (DHSC), and other UK Governments, for flexibilities to be built into the NHS Pension Scheme that will allow members to pay less for a lower NHS Pension. This would mean that they are less likely to breach the Annual Allowance and trigger a tax charge. We are hopeful that such flexibilities will be ready for April 2020 and the 2020/21 tax year.
In the immediate absence of such a solution, and the parliamentary void in the run up to the election, NHS England, keen to avoid a winter crisis, have proposed the following:
- Any clinician, including a dentist, who triggers an Annual Allowance pensions tax charge in the tax year 2019/20, will ultimately have this tax charge paid by the NHS;
- This tax charge would initially have to be paid by the NHS Pension Scheme (with members electing for this "Scheme Pays" option, rather than pay the tax bill themselves through their own tax return);
- Where the Scheme Pays option would usually result in a deduction to pension benefits, once you reach retirement, NHS England has promised that compensation will be paid to make good that deduction. This promise will apparently take the form of a contractually binding commitment, backed by the NHS and the Secretary of State for Health and Social Care.
This announcement, along with the accompanying FAQs, leaves a lot of questions unanswered. Without knowing the exact form of words sitting behind the binding commitment, as well as knowing the exact details, it is simply impossible to welcome this as being a valuable policy. However, steps to address the problem caused by Annual Allowance charges are encouraging.
The BDA has written to NHS England for further information and we have posed questions to the Department for Health and Social Care, who ultimately formulate NHS pension policy. We will continue to work to get clarification. Further information will be made available when we know it.
The message from NHS England, who are keen to encourage all clinicians to work without fear of Annual Allowance tax penalty, is: "Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension."
Paul Blaylock, Chair of the BDA's Pensions Committee, said:
"Half of our NHS dentists are planning to cut their NHS hours to reduce their exposure to this pensions tax. When patients are already struggling to secure access we need a permanent solution, not just sticking plaster reforms."
Further information on the NHS Pensions Scheme is available on our Pensions Tax page.