The Government will extend the ‘scheme pays’ deadline for GPs to claim NHS pension scheme support with their pension taxes to March next year.
Under the ‘scheme pays’ mechanism, GPs can apply for annual allowance tax charges to be deferred until retirement and taken out of their pension fund rather than having to pay them upfront.
The deadline to claim the support for the tax year 2020/21 was 31 July 2022.
But in an email to NHS pension specialist at Quilter Graham Crossley, seen by Pulse, the Department of Health and Social Care (DHSC) revealed that this will be extended to 31 March 2023.
It said: ‘The Department has listened to concerns from stakeholders that an extension to the voluntary scheme pays deadline for the 2020/21 tax year is required. The previous deadline for this had been 31 July 2022.
‘The Department can confirm that the NHSBSA is making arrangements to extend this deadline to 31 March 2023.’
A spokesperson for the NHS Pensions team at the NHS Business Services Authority (NHSBSA) confirmed to Pulse that the deadline would be extended to ‘support members of the NHS Pension Scheme who are front-line healthcare workers dealing with the continued impact of the coronavirus pandemic’.
They added that the NHS BSA will publish more information on its website ‘in the coming days’.
The move follows calls from Quilter to extend the annual deadline again this year, after it was extended last year and the year before due to the impact of the Covid pandemic.
Mr Crossley said that while the decision is ‘sensible and pragmatic’, GPs ‘urgently need solutions to the punitive taxation rules that are causing workforce retention issues’.
He said: ‘The standard annual allowance of £40,000 is still an issue for many healthcare workers and these issues are not limited to the highest earners.
‘Whilst scheme pays allows savers to settle annual allowance tax charges through their NHS pension without needing to find cash upfront, it is not a solution for an unfair tax system that is no longer operating as intended.’
Mr Crossley reiterated calls for reform to the way annual allowance calculations assess inflation in the ‘short term’, saying this is ‘not fit for purpose’ and is seeing GPs ‘brace for eyewatering tax bills landing on their doorsteps’.
And he said that in the longer term, there must be ‘a workable solution for senior healthcare workers so that they are not penalised for working in the NHS’ but are taxed ‘fairly’.
He added: ‘There have been welcome murmurings that if Liz Truss is to become the next PM one of her first priorities will be to “sort out” the issues with doctor’s pensions, however, care will be needed to ensure that any solutions are truly fit for purpose.
‘As is always the case, the devil is in the detail and any plan needs to ensure that it does not produce unintended consequences that further muddy the water of what is an incredibly complicated system.’
What is ‘scheme pays’?
Under the current NHS pension scheme, the highest-earning GPs pay at least 14.5% in contributions, but a tapered annual allowance limits the amount of money that can go into the pension pot each year without facing significant tax penalties.
The pensions taxation rules, in particular around annual and lifetime allowances, push GPs to reduce their hours or retire early to avoid large tax bills.
The ‘scheme pays’ arrangement allows annual allowance tax charges to be deferred until retirement by settling charges from the previous tax year through the pension scheme.
Under a special arrangement for the 2019/20 tax year, GPs facing a tax charge over the pension savings annual allowance threshold could have this charge paid by the NHS pension scheme via scheme pays and then be compensated for the effect of the deduction on their pension income when they retire.
The Government made the compensation available in 2019 in order to allow clinicians to take on more shifts or sessions without worrying about an annual allowance charge on their pensions.
And it has been reported that Prime Ministerial frontrunner Liz Truss has pledged to relax GP pension tax charges in a bid to stem the exodus of doctors from the NHS.
Meanwhile, the BMA announced in July that it has been granted a judicial review into the Government’s ‘unlawful’ handling of NHS pensions.
READERS' COMMENTS [3]
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Ever worked out the full cost (interest and all) of “Scheme Pays”? It’ll make you weep. It’s not “Scheme Pays”, it’s government gangsters offering you an offer you can’t refuse – “yous pays, capiche?”, – thousands of pounds a year off your hard earned pension, over which you have zero control.
Agreed David, I think the cheque that went to HMRC when I drew my pension was an oversized shiny one like the postcode lottery.
Let’s see if they standby CPI indexation of benefits!
Not sure why folk don’t come out pf the scheme when LTA approaches.
I did age 50 when approaching LTA and deferred, with FP16 protection.
Not a single penny in AA or LTA paid.