Another consultation on pensions is launched

But confusion still remains over ‘pension recycling’

By Edie Bourne

New proposals to change the NHS Pension Scheme do not go far enough to tackle the punitive tax issues consultants are facing, according to specialist financial planners Cavendish Medical.

Back in September, the then Health and Social Care Secretary Thérèse Coffey announced ‘Our Plan for Patients’ which included plans to:

 Offer ‘pensions recycling’; 

 To fix rules unfairly linking the NHS pension to inflation;

 To introduce a series of measures to increase retirement flexibilities. 

Now a consultation has been launched to gather feedback on these key components, which is expected to last until February with new measures introduced in Spring. 

But critics say that, unfortunately, the consultation does not include specific strategies to address the wider issue of doctors forced to retire early or reduce hours due to the annual or lifetime allowance taxing their pension growth. 

Patrick Convey, technical director of Cavendish Medical, explained: ‘In his recent Autumn Statement, the Chancellor Jeremy Hunt did not address the very real problem of pension tax driving our senior doctors away from their jobs. 

‘However, the former Health and Social Care Secretary’s [Hunt’s] announcement in Parlia­ment that some smaller measures would be taken forward was welcomed. 

‘Sadly, we can see that while some of these new tools could be useful for those nearing retirement, the wider workforce, particularly those in middle career positions, will not benefit unless we see widespread change. 

Pension recycling

‘As it is, there is already confusion over some of the measures announced. For example, pensions recycling was one such proposal. This is where employees who have opted out of the NHS Pension Scheme can ask their employer to pay any unused employer pension contributions as additional salary. 

‘It could be an effective policy, but the rules are not yet clear and it is not being followed by all trusts.’

Mr Convey said at the time of Ms Coffey’s speech there was some confusion over whether trusts would be ‘encouraged’ or ‘mandated’ to offer this opportunity to senior doctors. 

But without a mandate in place, it could be a lottery as to whether doctors could take this useful option. 

Cavendish Medical had spoken to several trusts as part of its work with clients and not all were ready to adopt this scheme. Some were offering recycling now but had imposed a range of conditions that must be met for eligibility. 

Continued Mr Convey: ‘For example, one trust has indicated that an employee would not be able to reduce their programmed activities without its permission. In other cases, the trusts insist that the applicant has received advice from a financial provider about opting out before proceeding.

‘Hopefully, this latest consultation will ensure a mandate is put in place for pensions recycling and other pension flexibilities to make opportunities available to all employees.

‘Anyone confused over the latest proposals or considering their future should always seek help from specialist financial planners who understand the benefits and nuances of the NHS Pension Scheme.’