Consultations have been published seeking views on proposed changes to pension schemes for teachers and NHS workers. In separate findings from the Department for Education (DfE) and the Department for Health and Social Care (DHSC)
Teachers Pensions
Views are sought on changing the scheme rules for England and Wales teachers’ pension opt out scheme rules, the intention is to allow greater flexibility for independent schools in this process.
Currently where an independent school elects to opt out of the pension scheme this results in all members becoming deferred. Proposals are to ensure that in future, where the independent school chooses to opt new staff out of teachers’ pensions, existing members of that scheme will be allowed to remain in as active members.
DfE are keen to hear of any alternative proposals or measures that might help to achieve the aims outlined in the consultation.
The closing date is 3 November 2019.
The document can be found here.
NHS Pension Scheme Review
Anyone in receipt of an NHS pension has been in an enviable position. The relative generosity of the scheme has made this a highly valuable part of the package of pay and benefits for NHS staff.
The cost of providing tax incentives for this type of scheme is becoming increasing costly at over £50bn and as government seeks ways to address this through a series of restrictions. Commencing in 2010, with restrictions to the amount of pension saving that receives tax relief. As a result of these measures some staff, mostly senior doctors have seen pension growth to a level that exceeds their tax -free allowances. Further measures on tapering relief of pensions was introduced in April 2016 but has not resolved concerns.
The impact of this tax levy applied to the pension growth that exceeds the tax-free allowance has raised financial concerns from senior doctors, with many now looking closely at whether it is in their financial interest to do extra work for the NHS. For some, the potential impact of the tax changes is prompting them to consider retirement or in extreme cases withdrawal from the NHS Pension Scheme altogether.
It was recognised that different groups and individuals were affected by the taxation regimes in different ways. Initial restrictions to the lifetime allowance was a contributory factor leading to General Practitioners seeking early retirement. The British Medical Association (BMA) and NHS England agreed, as part of GP contract negotiations earlier this year, to ask the Government to consider a 50:50 option through which GPs could reduce both their pension contributions and their pensions accrual by 50%, to manage the growth in the size of their pension pot.
However, it was clear from the early responses that a 50:50 option would not provide sufficiently broad flexibility for individuals to balance their pay, pension growth and tax liability.
The Government is prepared to change the rules of the NHS Pension Scheme to make it more flexible for clinicians who are likely to incur an annual allowance tax charge. The consultation proposes a flexible model through which clinicians can reduce their pension accrual in 10% increments and pay correspondingly lower contributions. And,
Clinicians would be able to choose a personal accrual level before the start of the scheme year and have an opportunity to fine tune their pension growth towards the end of the scheme year by updating their chosen accrual level when they are clearer on total earnings.
The consultation closes on 1 November 2019
