Will the NHS be paying pensions tax bills?

Figures released last week showed delays in A&E and for routine operations were at their highest levels since targets were introduced more than a decade ago. As we have mentioned, one contributory factor is the "perfect pensions storm" that has engulfed the NHS.

For some months, the Government has tried to respond to concerns that high-earning NHS clinicians are managing their pensions tax liability by reducing their workload, turning down extra responsibilities and/or retiring early, which is affecting NHS service capacity and patient care. Most recently, it consulted on new proposals to provide increased flexibility for senior clinicians in the NHS Pension Scheme (NHSPS) who are exceeding their annual pensions tax limits.

That consultation closed on 1 November 2019 and the Government's response to it has yet to be published. However, there have been a string of press reports that the Government intends to allow senior clinicians to pay their pensions tax liability for this tax year using the scheme pays facility available under the NHSPS, with the Scheme making good any corresponding reduction in the clinician's pension when the individual comes to retire. This suggests that the pensions tax cost will be met by NHS employers, albeit that it will not arise until the clinician in question retires.

Reportedly, this measure will only apply for the current tax year whilst the Government formulates a longer-term solution to the problem. We do not know whether a Government announcement will be made to confirm this approach given that major announcements are not usually made during election "purdah". It may be that a statement will find its way into the Conservative Party manifesto instead.

In a separate development, NHS Scotland has announced its own measures to tackle the pensions tax liability affecting clinicians in Scotland. From 1 December 2019, eligible NHS staff will have the option to have their employer pension contributions paid to them as part of their basic pay. This interim policy will run until the end of the current financial year, pending the outcome of the consultation mentioned earlier, as the rules regarding pensions taxation are reserved to the UK Government and any changes to the NHSPS require the consent of HM Treasury.