Dr Benjamin Holdsworth on what the proposals might mean
Back in September, the ‘then’ health secretary Thérèse Coffey announced ‘Our Plan for Patients’ which included proposals to offer ‘pensions recycling’ as well as to fix the rules which unfairly link the NHS pension to inflation and to introduce a series of measures to increase retirement flexibilities. Now a consultation has been launched to gather feedback on some of these key components which is expected to last eight weeks with new measures introduced in Spring.
Unfortunately, the consultation does not include specific strategies to address the wider issue of doctors forced to retire early or reduce hours because of the Annual or Lifetime Allowance taxing their pension growth.
While the new tools could be useful for those nearing retirement, they will not have the same benefit for the wider workforce, particularly those in middle career positions.
In addition, there is already confusion over some of the measures announced back in September such as pensions recycling. 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.
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. Without a mandate in place, it could be a lottery as to whether doctors can take this useful option. We have spoken to several Trusts as part of our work with clients and not all are ready to adopt this scheme. Some are offering recycling now but have imposed a range of conditions that must be met for eligibility.
For example, one Trust has indicated that an employee would not be able to reduce PAs without its permission. In other cases, the Trusts insist that the applicant has received advice from a financial provider about opting out before proceeding.
If you are confused over the latest proposals or considering your future, please seek help from specialist financial planners who understand the benefits and nuances of the NHS Pension Scheme. While opting out may reduce tax charges, it is not always the right financial decision – an independent and exact review of the circumstances is required.
Dr Benjamin Holdsworth is director of Cavendish Medical – specialist financial planners for medical professionals in the NHS or private practice. For a second opinion on your finances, please contact us on 020 7636 7006. www.cavendishmedical.com
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