The ‘McCloud remedy’ does not mean you can avoid tax issues now
By Edie Bourne
Doctors should urgently request their pension annual allowance statements from the NHS if they have not yet received their copy, say specialist financial planners Cavendish Medical.
Annual pension statements for 2021-22 are now available from the NHS Pensions Agency and are essential to help doctors establish whether they are likely to be paying substantial tax charges on their pension savings.
The NHS Pensions Agency is duty bound to send statements to those believed to be breaching the standard annual allowance of £40,000 but not to those exceeding the ‘tapered’ annual allowance which applies to higher earners and can be as low as just £4,000.
Patrick Convey, technical director at Cavendish Medical, said: ‘For this reason, many medics wrongly believe they do not have an excess tax charge to pay on their pension growth, but actually, they just might not have been made aware of the problem.
‘This year, we have the added complication of the McCloud remedy which will offer compensation benefits to those deemed to have suffered age discrimination when moving to the 2015 NHS Pension Scheme.
‘While it is true that the judicial ruling may mean the figures for many doctors of the last few years will need to be recalculated, the official legislation is not due until October 2023.
‘For this reason, it is important for doctors to address their pension savings’ tax issues in the normal way with the correct figures now – including paying any tax liable – and then recalculate when their new pension details are known at a later date.’
Those breaching the annual allowance can apply for the NHS to pay the tax charge under Scheme Pays in exchange for reduced future benefits.
The application for Scheme Pays is normally 31 July each year, so for the 2021-22 tax year, this will be 31 July 2023. There are also other payment options which should be considered.
Mr Convey told Independent Practitioner Today: ‘Many doctors are working long hours and facing another extra busy winter. There is scarce time to spend keeping up to date with the latest tax regulations.
‘This is also the first year that members of the former 1995 and 2008 schemes have been moved to the new 2015 scheme. While you retain your service in the legacy schemes until 1 April 2022, after this date you will accrue benefits in the 2015 scheme – effectively monitoring two sets of pensions and rules.
‘The NHS Pension Scheme gets ever more complex every year and we are here to help you navigate the best path forward.’