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NHS England confirm their sticking plaster, but will the next Government find a cure for pensions tapering?

Technical article

Publication date:

17 December 2019

Last updated:

17 December 2019

Author(s):

Technical Connection

The NHS and the issues relating to pensions tapering have featured prominently throughout the year.

The impact of the annual allowance charges caused by tapering lead to many senior clinicians refusing to take additional work, reducing hours or even choosing to retire early. 

Initially, potential solutions looked at making adjustments within the scheme to try and resolve the issue, firstly with the idea of introducing a 50:50 option, followed swiftly by more flexible options to allow senior clinicians to try and manage their accrual. However, these options all involved a reduction in pension benefits and any changes weren’t planned until April 2020.

It became clear that more immediate action was required to try and resolve the issue in the current year and in September the NHS issued guidance for employers to offer local solutions. These options were complex and most had significant drawbacks and so showed little sign of solving the problem.

With the election looming and the NHS becoming a key issue, NHS England took drastic action at the end of November to try and temporarily resolve the issue and announced that they would cover clinicians’ annual allowance charges for the 2019/20 tax year. 

There was initial scepticism amongst clinicians and the British Medical Association (BMA) and other representatives sought clarification around the process and that the offer was watertight.

On the 7 December Matt Hancock the Secretary of State for Health and Care issued a statement confirming agreement to support the proposal and outlining that the process will involve a binding contractual commitment. The agreement will involve the clinician making a Scheme Pays election in relation to the excess accrual within the NHS scheme in the normal way. When the member takes benefits the Scheme Pays deduction will be made. The contractual commitment will then provide a payment equivalent to the annual allowance deduction. Where an NHS trust or foundation ceases to exist the liabilities would be transferred to another NHS body or the Secretary of State.

The measure applies to all pension inputs to the NHS schemes in the 2019/20 tax year excluding additional voluntary contributions.

The additional statement and clarification provides reassurance that clinicians can take on additional work in this tax year without the concern of annual allowance charges arising in the NHS scheme. However, due to the potentially very long-term nature of the commitment not all clinicians will be convinced. More importantly this is a temporary solution and will only resolve the issue for 2019/20. Whoever forms the next Government will need to act fast if they are truly committed to improving the NHS.  

Whilst all the main political parties included a commitment to review the impact of tapering on the NHS in their manifestos none have specifically mentioned the removal of the tapered annual allowance.

Although the solution appears to be good news for affected clinicians in the current tax year, tapering has caused wider issues in the public sector and beyond.  It appears that the only real cure would be to remove tapering entirely. Whether the next Government will be willing to make this more drastic move we will have to wait and see.

 

The NHS frequently asked questions relating to the proposal are available here.

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.

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