Short-term pension tax ‘solution’ confirmed by NHS England

NHS England chief executive Simon Stevens set out details of the scheme in a letter to trade unions and royal colleges this morning.

He said it would “ensure that clinicians who exceed their NHS pension annual allowance in this financial year are not left out of pocket”.

This stop-gap solution comes amid huge concern about senior doctors turning down additional shifts, because of the threat of large tax bills on their pensions. This has exacerbated staff shortages and prompted warnings over the impact on performance and patient safety.

Today’s letter stressed: “Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension.”

HSJ has been told that the staff unions and bodies have been asked to “aggressively” market the solution to members, to try to persuade them to take on additional shifts. National officials have talked of sending the message to clinicians that the move could enable them to make very large amounts of money during 2019-20.

Mr Stevens said the new scheme - drawn up in the last couple of weeks - would enable clinicians who hit their annual pension allowance and are subsequently notified of a tax liability for this financial year to use “scheme pays” on their pensions form. This would mean they “don’t have to worry about paying the fee out of their own pocket”.

Under scheme pays, which is operated by NHS Pensions, 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.

The NHS would then in a “contractually binding commitment” pay them a “correspondent amount on retirement, ensuring that they are fully compensated for the effect of the ‘scheme pays’ reduction”.

Details set out by NHS England confirmed the scheme would cover the full tax charge for their pension accruals, rather than just any additional work undertaken above normal hours.

Mr Stevens warned a “substantive answer” from the government on the tapered annual allowance issues seems “unlikely to take effect before the new tax year”, given the general election and deferred Budget.

Mr Stevens said the temporary scheme would apply to doctors, nurses, allied health professionals and other clinicians who are members of the NHS pension scheme - but non-clinicians including senior managers are not covered. NHSE states in its FAQs on the new scheme that there is a less clear case the charges are creating similar retention and productivity issues in the non-clinical NHS workforce.

Mr Stevens said local employers would incur “no extra costs” as a result of this provision, which would be nationally funded. The source of future funding for it nationally is not clear.