The Department of Health has proposed a new temporary solution to the tax issue that has meant that senior medical staff in particular have felt unable to take on additional duties or work extra hours.

The NHS Pension Scheme has always had a provision called ‘Scheme Pays’.  When someone has to pay a tax charge on their pension saving, the Scheme can pay it for them.  Their eventual benefits drop accordingly.  This stops staff having to find the money themselves up front.

The proposal is that for the current tax year (until April 2020), if staff use Scheme Pays to pay any tax charge, the NHS will make good this drop when they eventually take their benefits.  We don’t know the exact mechanism for this.  NHS employers are however expected to publicise the proposal to staff straight away to allow them to take on extra work.

This means that although staff will pay pension tax charges now via the Scheme, they will not lose out in the long run.  They can in fact save tax free above the usual limits.

It will cover all clinical staff with annual allowance issues in the NHS Scheme.  Earlier proposals talked about ‘senior clinicians’ only, so this may well have a wider effect.

We still expect a different longer-term solution, although the flexible payment option recently consulted on may not develop until the New Year at the earliest.  It’s been overtaken by the election.

This proposal seems to be a pragmatic short-term solution to deal with a real problem on the ground caused by pension tax decisions, although it’s not available to non-clinical staff or staff in other public pension schemes.  We will watch for further permanent developments.