- NHS Business Services Authority is considering extending Scheme Pays for high earners
- Chief executive says individuls who do not qualify are hit with huge upfront tax bills
The organisation that runs the NHS pension is “actively considering” extending a facility designed to ease the tax burden on high earners, amid reports of staff being hit with bills worth many thousands of pounds a year.
The NHS Business Services Authority told HSJ recent changes to the annual allowance, which governs how much tax relief can be applied to pension contributions each year, are having “implications” on NHS pension scheme members.
In response, it is considering whether to extend the Scheme Pays facility. Under Scheme Pays, which is operated by NHS Pensions, part of the NHS BSA, individuals can ask for tax bills on pension contributions worth more than £40,000 a year to be paid out of their own pension pot.
However, NHS BSA does not currently extend this facility to people who earn over £150,000 but whose contributions are lower than £40,000 a year because of “administrative costs”.
As a result, those individuals are hit with a bill they have to pay out of their own pocket.
An NHS BSA spokesman said: “We are aware that the NHS pension scheme in Scotland and the teachers’ pension scheme have recently extended their scheme pays provisions and we are taking this into consideration.”
One trust chief executive, who wished to remain anonymous, told HSJ people who do not qualify for Scheme Pays were having to pay tens of thousands of pounds in tax upfront.
The trust chief said he knew of individuals who had been hit with an annual tax bill as high as £13,500, “all because Scheme Pays won’t actually pay”.
“It is catching so many people in the public sector… They are not the fat cats who it was set up back in the day to catch,” they added.
The new rules for tax on pensions contributions were introduced in April 2016 and affect people earning over £150,000.
As well as high-e rning managers, the issue was affecting senior doctors and nurses as “every source of income” – including that earned outside their basic NHS salary – counted towards the £150,000.
The chief executive said senior managers and clinicians may opt to leave the pension fund because of the combined effect of these tax bills and the government’s new cap on tax relief.
HSJ reported last week that the Department of Health and Social Care has admitted there is evidence of high earning individuals taking early retirement because of new lower lifetime and annual allowance tax limits.
Sarah-Jane Marsh, chief executive of Birmingham Women’s and Children’s Foundation Trust, said on Twitter that her organisation was “definitely seeing the impact of this” with some “horrendous figures owed for relatively modest increases related to change in a role”.
“We have people with 10 to 15 years left to work who cannot afford to stay in the scheme,” she said.
Jon Rouse, chief officer for Greater Manchester Health and Social Care Partnership, replied that this was a “growing and significant problem”.