Frequently asked question for employees

Pensions tax is a complex subject and the information set out in this document is intended to provide a concise summary of the new NHS Annual Allowance Policy 2019/20. If you have any questions about the annual allowance or how this scheme might affect your personal financial position you should consider advice available on HMRC, BSA and NHS Employers websites, and take independent financial advice.

These questions will be updated based on feedback from both staff and employers.

Last updated: 11 March 2020

The Commitment will only apply to clinicians who:

  • are members of the NHS Pension Scheme (NHSPS) in the tax year 2019/20
  • are employed or engaged in a role that requires registration with an appropriate healthcare regulatory body, see: Professional Standards Authority – Which professions are regulated
  • have a valid registration for the period of the 2019/20 “Scheme Pays” election
  • receive a tax charge associated with breaching the annual allowance, including the tapered annual allowance, in 2019/20 in respect of membership of the 1995, 2008 and 2015 NHS pension schemes and use “Scheme Pays” election to pay the tax charge.

Individuals who meet these criteria are referred to as “Eligible Clinicians”. These criteria apply equally to General Practitioner and General Dental Practitioners, and those working for NHS Trusts*, relevant non-NHS employers, and General and Dental Practices. If you are an employee, your employer will need to vary your contract of employment to incorporate the 2019/20 Annual Allowance Compensation Policy.

The commitment does include pension tax liabilities incurred due to accruals in the MPVAC scheme, APC benefits, and/or added years in the NHSPS, or contributions to another scheme.

*Throughout these FAQs the term NHS Trusts is used to cover both NHS Trusts and NHS Foundation Trusts

Clinicians working for non-NHS organisations would also be eligible to benefit from the commitment providing they are delivering NHS services and meet the overall eligibility criteria, including being employed or engaged in a role that requires registration with an appropriate healthcare regulatory body and are a member of the NHS Pension Scheme.

We note that some General Practitioners, Dentists and other clinical staff may be members of the NHS Pension Scheme not as NHS employees but by virtue of holding contracts for the supply of NHS primary care services, or being members of a GP partnership which holds such contracts.  This means that the detailed implementation of the policy will need to be slightly different in primary care, but the benefits provided by the commitment will be the same.

Guidelines and FAQs for different sectors will be provided to relevant employers.

NHS organisation employees
The Secretary of State ultimately takes responsibility for liabilities of NHS organisations. The commitment to make this payment will be contractually binding as between the individual clinician and their NHS employer or successor). However, if there is no NHS body responsible for meeting this liability at the time you retire, the Secretary of State will take responsibility for securing that payments are made.

Clinical academics
If you are a “clinical academic” whose substantive employer is a Higher Education Institution (HEI) and who has an “honorary contract” with an NHS Trust, then NHSE has agreed with the HEIs that it is the HEIs who will make the contractually binding promise to make the payments to you under this policy.  The HEIs will make this promise on the basis that the Trusts in turn will make a contractually binding promise with the HEIs to meet the costs of paying for the Commitment. This promise is in turn backed up by the Secretary of State.

Independent and third sector employees
If you are carrying out NHS work in the independent or third sector and are paying into the NHS Pension Scheme during 2019/20 as a result of this employment, your employer may make the contractually binding commitment to make the payments to you under this policy.  The providers can make this promise on the basis that the NHS commissioners (on behalf of NHS England) will make a contractually binding promise with the providers to meet all the costs. This promise is in turn backed up by the Secretary of State.

GPs and primary care clinicians
If you are a GP Partner then the promise to make the payments under the 2019/20 Commitment is being made to you directly by NHS England under their power to provide assistance/support to GPs who provide primary care. This is in turn backed up by the Secretary of State. For GPs and other clinicians who work for GP practices, then the promise is backed up by NHSE and the Secretary of State.

Where an NHS trust or NHS foundation trust ceases to exist, its assets and liabilities as well as the services they provide will be transferred to another trust or other NHS body, or to the Secretary of State. This means that the financial commitments, including the commitment to compensate eligible clinicians, made by NHS trusts and NHS foundation trusts will be safeguarded.

The promises in relation to the commitment made by Higher Education Institutions to eligible clinicians would also be expected to transfer to a successor organisation in the Higher Education sector upon cessation for any reason of the HEI. However, should this not be the case these promises are guaranteed by the partner Trusts and ultimately the Secretary of State.

The promises in relation to the Commitment made by Independent Sector providers to eligible clinicians are guaranteed by the NHS bodies commissioning the services from the provider (and ultimately by the Secretary of State).

Eligible clinicians are able to take on additional shifts in 2019/20 without being worried about the effect that the pay from any additional work will have on their pensions tax liability relating to the Annual Allowance for 2019/20.

Most eligible clinicians will not need to do anything until after they have received their pension savings statements for 2019/20 (the latest date these will be received is 6 October 2020). GPs will need to work with NHSBSA to confirm their earnings as usual under the current processes.

If a potentially eligible clinician expects to retire before receiving their pension savings statement, they should submit a Scheme Pays election based on estimated information before they retire. Information on how to do this is set out in the Scheme Pays Election Guide.

Yes. A scheme pays application is a necessary but not a sufficient condition for entitlement to payments under the Policy. That is, it is possible to be eligible to make a scheme pays election but not be eligible for payments under the Policy. For example, this could be the case where a member breaches their annual allowance by virtue of other pension savings such as contributing to the MPAVC scheme, building up APC benefits and/or added years in the NHSPS or making contributions to another scheme.

The scheme pays process is set out in detail in the following documents:

If an eligible clinician believes that they have a 2019/20 annual allowance charge they will need to make a Scheme Pays election. Details on how to do this and the relevant deadlines are set out in the Scheme Pays Election guide.

The process for employers to confirm eligibility for the 2019/20 commitment payments will run alongside the Scheme Pays election process and will be set out in due course.

Your rights are not impacted.  As in any year your pension will be reduced if you use Scheme Pays for 2019/20 to pay HMRC for any pension tax liabilities incurred.  However, on retirement you will receive a separate payment which compensates you for the reduction to your pension from using Scheme Pays for 2019/20 pension tax liabilities.

Clinicians providing care to NHS patients who have previously opted out for some or all of the 2019/20 tax year are normally able to opt back into the NHS Pension Scheme, if they wish to do so.

If a member does opt back in, they will not be able to backdate the date of re-joining and their contributions.

More information on opting back into the NHS Pension Scheme (and the Section that members would be eligible to join) can be found at the following websites:

There is no cash alternative to compensation that can be offered if you are not a member of the NHS Pension Scheme in 2019/20.

If an eligible clinician changes employer after the end of the 2019/20 tax year, there will be no impact, as payments under the Policy will remain linked to the employer that endorsed the member’s eligibility.

If an eligible clinician moves between employers during the 2019/20 tax year, and incurs a tax charge, then the additional payments under the Policy will be linked to the employer which made the commitment to the employee (via the published draft letter).

 

 

 

We are working with the NHS Business Services Authority (NHSBSA) who already administer NHS Pensions. They will be providing the administration for payments that are made to clinicians under this Commitment.

The administrator, NHS Business Services Authority (NHSBSA) must provide members with a pensions savings statements by 6 October following the end of any tax year if they breach the standard annual allowance of £40,000.

This can be used to determine whether or not you have an annual allowance tax liability for 2019/20. If for any reason members do not receive this information by 6 October 2020 they should request it from the scheme administrator. This is set out in the NHSBSA pension savings statement guide.

If this information is not available immediately from the administrator, members can estimate their pensions savings and where appropriate apply for scheme pays (with a view to amending it in the future when final information is available). Your pension savings and potential tax liability can be estimated using your pensionable pay and total income, and, taking into account any known annual allowance carry forward.

Further information on this can be found on the NHSBSA’s website and in the NHS Business Services Authority’s Pensions Savings Statement Guide. HMRC publish an annual allowance calculator.

It is NHS England’s intention that members who do not receive their information in time due to delays in administration will still be eligible for the 2019/20 Commitment.

You can retire. As is the case in any year, if you are about to retire you must submit an estimated Scheme Pays application form before you stop working and draw your pension if you have not yet received your Pension Savings Statement.  Using Scheme Pays for 2019/20 is a condition if you wish to take advantage of the commitment that has been made for 2019/20. The NHSBSA scheme pays election guide sets out more detail on how to make an estimated Scheme Pays application.

For those who are retiring during the next few months it may be that, your employer will be asked to confirm your eligibility after you retire.

Payments under the commitment may not be made until the correct Scheme Pays adjustment for the 2019/20 tax year is known.  Appropriate back payments to the date of retirement will be made in this circumstance.

On early retirement members will also be fully compensated for any 2019/20 tax charge if they have confirmed their eligibility. On early retirement the pension will be reduced for early payment and the scheme pays adjustment in respect of the 2019/20 tax year (as well as for any other tax years) will be calculated in the normal way using the factors in force at the time (based on age at early retirement) and applied to the early retirement pension.

Scheme Pays adjustments can apply to different sections of the NHS Pension Scheme and so could become effective at different times if the benefits are taken separately. Payments made to deliver the 19/20 Commitment will also become effective at different times to match this. The pension scheme that any 2019/20 scheme pays adjustment will apply to is determined at the time the scheme pays election is made and depends in which scheme the annual allowance was breached.  This is set out in the scheme pays election guide.

Yes – the payments made under the 2019/20 Commitment will still be available alongside your regular NHS Pension at retirement, even if you cease NHS employment/work before retirement.

If an eligible clinician is employed by more than one Trust during the 2019/20 tax year and incurs a tax charge, then the additional payments under the Policy will be linked to the employer with the most substantive employment over the period. We are working on the process for establishing Policy eligibility where there is more than one employer (as only one employer is required to make the contractual commitment).

However, this should have no impact on employers as costs in relation to the payments will be met/reimbursed by NHSEI and administered by NHSBSA. We wish to avoid apportionment of the benefit in this case.

The eligibility criteria are set out earlier in the FAQ.  Only active members of the NHS Pension Scheme are covered. We are unable to make the commitment to active members of the Universities Superannuation Scheme (or any other pension scheme).

The eligibility criteria are set out earlier in the FAQ.  If you are a member of the NHS Pension Scheme during 2019/20 and meet the other criteria you may be eligible.

In this case, we expect that the NHS employer will make the commitment to you under the Policy and the allocation of the commitment to the NHS employer will be made through the endorsement of your eligibility.

This will depend upon the nature of the non-NHS employers. We will work with NHSBSA to establish the process for asking for endorsement for Policy eligibility where there is more than one non-NHS employer. We expect that one employer will take overall responsibility for endorsement. We wish to avoid apportionment of the benefit in this case.

Entitlement to these additional payments will immediately cease, and the right to receive future payments is extinguished if the Secretary of State directs that a clinician’s NHS Pension Scheme benefits are reduced or withheld entirely in exercise of powers [1] to forfeit such benefits upon conviction for treason, serious offences in connection with employment to which the pension scheme relates, or specific offences under the Official Secrets Acts 1911 to 1989  or in recovery of losses to public funds that resulted from criminal, negligent or fraudulent actions.   This applies to all Eligible Clinicians, whether working in primary or secondary care.

[1] 1995 Section: regulations T5 and T6 of the National Health Service Pension Scheme Regulations 1995; 2008 Section: regulations 2.J.6, 2.J.7, 3.J.6 and 3.J.7 of the National Health Service Pension Scheme Regulations 2008; 2015 Scheme: paragraphs 11 and 12 of Schedule 3 to the National Health Service Pension Scheme Regulations 2015.