We recently mentioned that, in a bid to help ease pressure on the NHS caused by clinicians reducing their workload in order to manage their pensions tax liability, it was being reported that the Government had agreed to a temporary solution to the problem.
Correspondence published on Friday, between NHS England and the Department of Health and Social Care, confirms that this is indeed the case but the devil is likely to be in the detail.
The intention is to make a "commitment" to certain clinical staff who have elected to use the NHS Pension Scheme (NHSPS) “scheme pays” facility to settle an annual allowance tax charge arising from their pension saving in the NHSPS in 2019/20. That commitment will be to make payments outside of the NHSPS to restore the value of their pension benefits package.
The Government points out that such an arrangement constitutes an example of tax planning and that, depending on how it is put into practice, it could constitute tax avoidance; NHS England "should seek to minimise this risk".
Separately, NHS England has published more information on the arrangement. In particular:
- NHS employers (backed by the Government) will make a contractually binding commitment to pay clinicians a corresponding amount on retirement, ensuring that they are fully compensated in retirement for the effect of the 2019/20 scheme pays deduction.
- The scheme is being nationally funded at no net cost to NHS employers.
- The arrangement will only apply for the current tax year whilst the Government formulates a longer-term solution to the problem.
Even though we are in election "purdah", the Government states that "it is operationally necessary and urgent to take further action on clinicians’ pensions to protect patient care over winter" and that this cannot wait until after the General Election.