By Robin Stride
Pension rule changes in the pipeline mean some independent practitioners will be paid a welcome tax refund.
Doctors are being advised to take specialist pension and tax advice to help choose the best option for them arising from an NHS Pension Scheme shake-up, currently out for consultation from the Treasury.
Deborah Wood, chairman of the Association of Independent Specialist Medical Accountants (AISMA), said: ‘This is a positive development for doctors who are members of the 2015 NHS Pension Scheme.
‘It follows a Court of Appeal judgment in December 2018, which ruled that the transitional protection arrangements under the scheme for doctors closer to retirement directly discriminate against some younger pension scheme members.
‘The Government is seeking views on two proposals outlined in the consultation. For doctors, the permutations are numerous, with consequences for revised tax calculations on pension growth.’
AISMA plans a fuller response once its pension experts have made a thorough analysis of the proposals, which are outlined in a 74-page report
Specialist medical accountant Vanessa Sanders, of Stanbridge Associates, said: ‘Doctors should neither panic nor push their heads further into the sand.
‘Despite the calculations being complicated, they can be done and alterations, if necessary, can be made to tax returns going back to the 2016 fiscal year under normal regulations, which will correct the majority of Scheme decisions.
‘What is needed now is clear guidance on the procedure to undo any detrimental decisions made, which should include the opportunity to access appropriate and relevant advice.
She added: ‘Under current procedures, pension advice can be paid for by an employer up to £500. In my opinion, it would be worth the NHS engaging an independent expert to identify those affected and to provide the advice as a consultancy service to those who need it rather than leaving it to the individuals, as the impact is so important to restoring confidence and trust, especially given the current circumstances where it is all hands on deck.’
James Gransby, a partner at RSM UK Tax and Accounting, said the exact form of remedy would not be known until some time after the consultation closes on 11 October 2020, so unless doctors wanted to respond to the consultation questions, there was no action to take until the final form of the solution was put forward.
In 2022, he said, it appeared that doctors would be asked to decide whether to:
- Maintain the status quo for the benefits they have been building up between 1 April 2015 and 31 March 2022. This will be the default option applied on their behalf if they do not state their preference;
- Make an irrevocable choice to switch from the reformed scheme they have been contributing to, to their legacy scheme, for that period. This is known as ‘immediate choice’;
- Defer their decision on whether to make the switch until retirement. They would then be provided with more information about the financial implication of the decision. This is known as ‘Deferred Choice Underpin’.
Mr Gransby said: ‘Knowing which option is right for you will mean becoming informed on the topic, or paying someone else who is, to help you make the best decision.’