By Edie Bourne
Independent practitioners with an NHS position are being advised not to wait to discover if they will receive an annual pension statement from the NHS Pensions Agency.
Specialist medical financial advisers Cavendish Medical is telling doctors they should actively request a statement now for 2020-21 to establish whether they are likely to be paying substantial tax charges on their pension savings.
The ‘annual allowance’ limits the amount of tax-free pension savings which can be accrued each year to £40,000.
Every autumn the NHS Pensions Agency issues statements detailing doctors’ annual pension contributions for the preceding tax year but only if the doctor has ‘deemed growth’ in their pension pot of more than £40,000.
Those who breach the harsher ‘tapered’ allowance may not get a statement, as the agency is not duty bound to issue them to individuals breaching this particular cap.
The ‘tapered’ annual allowance applies to pension savers with a ‘threshold income’ of over £200,000 and reduces the limit on a sliding scale to as low as £4,000 for the highest earners.
Doctors’ threshold income includes earnings from all sources, so this might include NHS salary, private practice or academic work, investment income and buy-to-let incomes.
The NHS Pensions Agency is not duty bound to issue statements to individuals breaching this particular cap.
Patrick Convey, technical director at Cavendish Medical, explained: ‘People can wrongly assume that if they do not receive a statement, they have not breached the annual allowance. This can cause significant issues.
‘There are several reasons for not receiving a statement – firstly, you may not have breached the standard allowance or the NHS Pensions Agency has not received your correct data.
‘Remember also that the agency is not monitoring the contributions to any private pensions, which will also count towards the level of allowance relevant to you.
‘To ensure you have a complete picture of your current position, we would urge you to request a statement as soon as possible.’
‘Scheme Pays’ facility
Those breaching the annual allowance can apply for the NHS to pay the tax charge under the Scheme Pays system in exchange for reduced future benefits.
The application for Scheme Pays is normally 31 July each year, but for the 2019-20 tax year, this has been extended to 31 March 2022.
There have not been any announcements regarding the deadline for 2020-21, which currently remains as 31 July 2022. There are also other payments options which should be considered.
Mr Convey told Independent Practitioner Today: ‘Pensions are not getting any less complex. There are new rules and regulations every few months and each one can have an impact on your calculations and your future plans.
‘Please give yourself enough time to ask for a statement – there can be lengthy delays at the agency – and have the figures thoroughly checked by experts well versed in examining the fine detail.
‘Every year, we witness statements with small errors such as wrong pay levels that can cause large mistakes if left unchallenged.’