Pensions – Annual Allowance

Lentells Medical Division

 

There has been good news for both practices and GP’s with regards to pensions.

 

 

In April 2019, the employer’s pension contribution rate was increased to 20.68% (including a 0.08% levy).   It has been confirmed that the additional 6.3% will be continue to be paid directly by NHSE for 2020/21.  

 

From 6th April 2020, there have been some changes in the annual allowance tapering threshold to reduce the tax charges faced by individuals in the higher earnings bracket.

 

These changes have increased the adjusted income and threshold income by £90,000 each, meaning more income can be earned before tapering of the annual allowance occurs.

 

The revised figures are as follows:

Adjusted income – Net income before tax with the addition of any pension accrual.

2019/20 - £150,000                            2020/21 - £240,000

 

Threshold income – Income before tax without the addition of any pension accrual

2019/20 - £110,000                            2020/21 - £200,000

 

The minimum annual allowance has also been reduced from £10,000 to £4,000 but this will only affect individuals with adjusted income over £300,000.

 

Where a GP has an annual allowance charge for 2019/2020, they can opt for the charge to be paid by the NHS pension scheme and the NHS employer will make a contractually binding commitment to pay a corresponding amount on retirement.  This means that the individual will be fully compensated in retirement for the effect of the 2019/2020 scheme pays deduction on their pension.  The scheme pays election needs to be completed and returned to NHS pensions before 31 July 2021.  

 

The scheme pays election deadline for annual allowances charges which arise in 2018/2019 is 31 July 2020.   The annual allowance statements should be available by the start of July, but in our experience, they are often delayed.

 

If the actual figures are not known by the submission deadline, a provisional election can be made and updated within 4 years, once the actual figures are known.

 

In recent years, NHS pensions has shown some flexibility in the deadlines in order to allow for issues in member pension records not being updated on time, but there is no guarantee that this flexibility will continue.