Proposed additional flexibility in NHS pension scheme
Proposed additional flexibility in NHS pension scheme
Tue 15 Oct 2019
The Government has recently consulted on ways to increase flexibility in the accrual of NHS pension schemes for senior clinicians to help them to avoid or manage pensions tax charges.
What’s the problem?
Changes to the pensions tax regime since 2010 are causing significant financial concerns to doctors who are either exceeding their annual or lifetime pensions allowances and incurring tax charges as a result. Most recently, the tapered annual allowance, introduced in April 2016, is causing senior medical staff to reconsider whether or not they can afford to provide additional patient care through the NHS.
What are the potential solutions?
The Government is consulting on the following potential solutions, amongst others.
- A range of options for clinicians to reduce the rate at which their pensions build up, so as to avoid annual and lifetime allowance charges. It had already been announced that the Government would consult on a BMA proposal for clinicians to elect at the beginning of the year to reduce their contributions and pension accrual by 50%. It is now consulting on the option of providing a range of accrual levels (rather than just 50% or 100%) as well as the ability to purchase additional pension by lump sum. This should allow clinicians to tailor their pension accruals closer to their desired level.
- Increased transparency in the ‘Scheme Pays’ facility. Under this facility, clinicians are given the option to meet any pension tax liabilities through the pension pots allocated to them under the NHS pension scheme, with the debt owed by the member (plus interest) deducted from the member’s pension on retirement. The increased transparency would involve members being given a pension debit so they can see the adjustment to their pension at the time they choose to use the scheme, rather than at retirement.
For a further discussion of the tax implications of pension contributions, or to discuss pensions more generally, please get in touch with a member of the Mazars personal tax or financial planning teams.
For pension tax relief, contributions to a SIPP must be money, not in-specie
The Upper Tribunal (UT) has overturned the First tier Tribunal’s (FTT’s) decision concerning the availability of pension contribution tax relief for a contribution of shares to a self-invested personal pension plan (SIPP) in the case of SIPPChoice. The FTT held that this could count as a contribution paid for the purposes of pension contribution tax […]
Pension savings escape Autumn Budget scare
Despite much speculation over recent weeks, surrounding the future of pension tax relief legislation, savers will have been relieved to hear there was no mention of any such change in the Chancellor’s Autumn Budget speech. Rumours had been rife that there could be radical reforms ahead. There had been suggestions of the introduction of a […]
Pensions reform
Before the Budget we all thought we knew broadly where we were on pensions and ISAs. On pensions the new rules on lifetime limits were on everyone’s mind with the April 2014 reduction of the limit from £1.5 to £1.25m, and the need to consider fixed protection against the reduction. The expectation was that the […]
Pension saving – guidance on individual protection 2014
HMRC have published updated guidance notes on individual protection (“IP2014”) from the pension lifetime charge. IP2014 was announced in Budget 2013 alongside the reduction in the lifetime allowance from £1.5m to £1.25m. Most individuals with more than £1.25m of pension saving on 5 April 2014 are entitled to apply for IP2014. Applying for IP2014 gives the […]
Annual pension allowance if input period includes 14 October 2010
The annual pension contribution limit operates by reference to pension input periods (PIPs). Each pension fund has its own PIP and all contributions within a PIP are treated as made in the year in which the PIP ends for the purposes of the annual limit charge. On 14 October 2010 the Government announced the rules […]
Pensions – Annual Allowance Statements
HMRC has announced that “Pension providers will soon be sending annual allowance pension statements for the 2013 to 2014 tax year to all pension scheme members contributing more than £40,000 per year to a pension scheme.
Make the most of pension reliefs now – further changes likely after general election
Politicians in both parties which make up the coalition have announced proposals to change tax aspects of pensions.
Pension Contributions to be Cut for High Earners
Pensions were once again prominent in the Budget with news that the Annual Allowance will undergo yet another revamp and that the future of pensions tax relief will come under the spotlight in a Government Green Paper. From April 2016 the government will introduce a taper to the Annual Allowance for those with adjusted annual […]
Final reminder! Maximising pension annual allowance in 2015/16
5 April sees the end of a significant opportunity to make highly worthwhile pension savings by taking advantage of: • the doubled annual allowance for 2015/16; and • unused allowances brought forward from the years 2012/13, 2013,14 and 2014/15. 2015/16 annual allowance This year was split between two pension input periods (PIPs); the first of which ran […]
Significant changes for employers could be coming with the government consultation on tipping and service charges
On 2 May 2016, the Government published its Consultation aimed at addressing its concerns about malpractice in the hospitality sector regarding the collection and distribution of what it describes are “discretionary payments for service” specifically identified as tips, gratuities, cover charges and discretionary service charges paid by customers of the hospitality sector. The Consultation follows […]
Whether relief is available for a pension contribution made in the form of assets in satisfaction of a debt
The First tier Tribunal has held that an agreement to make a contribution to a self-invested pension plan (SIPP) created a debt which could be satisfied by the transfer of an asset. As a result the contribution qualified for relief from income tax. Background The particular SIPP conditions in this case included terms that provided […]
Consultation on refinements to the hybrid and other mismatch rules
We have previously highlighted difficulties with the application of TIOPA 2010 s259ID income in a December 2019 tax blog. HMRC is taking the opportunity to consult on refining the hybrid and other mismatch rules following publication of the draft Finance Bill 2020 legislation. Dealing with the hybrid and other mismatches legislation is complex. For a […]
Pension contributions- HMRC withdraw inaccurate calculator
At the date of writing this blog, HMRC’s online pension annual allowance calculator has been withdrawn following widespread, critical press coverage drawing attention to its inaccuracy. The calculator incorrectly excluded unused allowances of up to £40,000 from 2015/16 from the total of cumulative unused allowances that can be used to increase a contribution made in […]
Mazars response to the OECD consultation on tax challenges of the digitalisation of the economy
The OECD issued a consultation fleshing out its January 2019 announcements of its review of transfer pricing rules for digital businesses and the concept of reforming applicable international tax principles using marketing intangibles. The consultation also includes anti-base erosion measures. Mazars submitted a response to this consultation which can be accessed here along with other […]
Consultation on preventing abuse of the SME R&D tax relief payable credit
HMRC has issued a consultation on preventing abuse of SME R&D tax relief that seeks to limit the abuse of the payable credit available to loss making companies. The method of restriction will be to limit claims for the payable credit to three times the company’s PAYE and NIC liability for the year. The measure […]
SME R&D tax relief payable credit – Consultation on preventing abuse
HMRC has issued a consultation on SME R&D tax relief that seeks to limit the abuse of the payable credit available to loss making companies. The method of restriction will be to limit claims for the payable credit to three times the company’s PAYE and NIC liability for the year. The measure will be introduced […]
OECD consults on digital services tax – changes to international tax rules may result
Following a webcast update on 9 October, the OECD has released a consultation on Pillar One (the allocation of taxing rights and review of profit allocation and nexus rules, in particular looking at “user participation”, “marketing intangibles”, and “significant economic presence”) of its work on the taxation of the digital economy. A consultation on Pillar […]
UK Immigration Update – November 2019
BREXIT An extension to the Brexit deadline has been agreed with the EU until 31 January 2020. This extension covers a period of three months as was predicted in the prior update. As a result, the immediate possibility of leaving without a deal has been prevented until at least that point. Information with regards to […]
Responses to OECD consultation on taxation of digital economy pillar one
The OCED has published the responses to its consultation on taxation of the digital economy – pillar one. A summary of that consultation was covered in our previous blog on the subject. Mazars responded to the consultation and its response can be found on the OECD website here. For further information, please get in touch […]
Budget 2020 – Implications of today’s budget for private clients
The Chancellor’s Budget announcement today contained a raft of giveaways for business but how will it affect you personally? Currently tax relief on pension contributions is limited to the annual allowance of £40,000. However, if your ‘threshold income’ exceeds £110,000 and ‘adjusted income’ (i.e. including employer pension contributions) exceeds £150,000, the annual allowance starts to […]
Are you caught by the pensions lifetime allowance cut?
April 2014 sees the pension lifetime allowance (LTA) cut from £1.5 Million to £1.25M. HMRC estimate that 30,000 people will be immediately affected by the cut and the consequences of breaking the limit are significant, a potential 55% tax charge on a part of your pension funds. The lifetime allowance (LTA) is the maximum amount […]