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Financial Tips
Helping Dentists & Doctors Achieve
Their Most Important Goals
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NHS Pension - Age Discrimination (McCloud Judgement)
As life expectancy has increased over the last few decades, so has the headaches for  the government with respect to public sector pension schemes.
The first step the government took to try and address this was in 2008 (re the NHS Pension) with the 'choices' exercise, where 1995 scheme members were offered the option of moving to the new 2008 scheme.
Whilst there were pros and cons to moving, the majority of members stayed put in the 1995 scheme.
Roll on to 2015, when the 'new version' of the choices exercise became compulsory - members would be moved / transitioned from the 1995 and 2008 schemes into the new 2015 scheme.
The big difference of course was that retirement age was now linked to one's state pension age, quite a difference from the normal retirement age of 60 in the 1995 scheme.
In December 2018, the Court of Appeal found that the new scheme was discriminatory against younger members and instructed the government to resolve the matter (known as the McCloud judgment).
So, what is the position now?
Well, there has been a consultation process (which ended in October 2020) and we are now waiting for the final guidelines.
What we can share is the proposals.
Members will be given the choice of which scheme to receive benefits from for the period 1 April 2015 to 31 March 2022, which is known as the 'remedy period'.
All members will then revert to the 2015 scheme from 1 April 2022.
Note that the government has not yet announced when members should make their decision, but the proposed choices are:
- In the years shortly after the remedy period ends in 2022
- When you actually take your pension
One thing to bear in mind is if you have had issues with the Annual Allowance, all the calculations that have been done for the 7 year period will need to be done again if you do elect to have your membership in the 1995 scheme.
It may mean that you will need to apply for tax rebates or pay additional tax.
In addition, you will also need to reassess your position with respect to the Lifetime Allowance.
We've recorded a brief video (<5 minutes) that covers this, including an example.
Take Action
An announcement will follow in 2021, so there's not much you can do at this stage, apart from being aware that changes are coming!
You can also read the leaflet that HM Treasury has published.
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Hot Topics Q&A: Annual Allowance Tax Charges 2019/20 - How Will The Compensation Scheme For Doctors and Dentists Work?
Every week we receive questions from clients regarding all aspects of their financial planning. So, rather than keep the answers to ourselves (and clients) we publish one key topic each issue.
Q. I'm aware that the government have promised to pay any Annual Allowance tax charges  incurred during tax year 19/20.
I've not received my Annual Allowance figures for 19/20 yet, so what shall I do now as I'm not sure if I'll have exceeded the allowance and therefore have any tax charges due?
A. The Annual Allowance figures will be sent to you within 3 months of your request. Also note that in some instances, NHS Pensions will be able to provide the figures to you over the telephone.
The key is that, if you do have a tax liability you will need to use the scheme pays facility as this will ensure that the government will cover the tax. The other option is to pay it via self-assessment, however if you do this you will not be reimbursed by the government.
Even if you have not received the Annual Allowance figures by early January, there's no need to panic.
What you can do is complete a scheme pays election (SPE), providing estimated or nominal figures for both the 1995 / 2008 and 2015 schemes.
Then, when you do have the figures, you can submit another SPE, which will replace the previous one.
If you don't have a tax charge, you can enter zero on the second SPE.
Whilst the formal deadline for scheme pays isn’t until 31 July 2021, members are encouraged to submit the forms by 31 January 2021 as this will avoid any interest charges that the scheme has to pay on payments after this date.
The next part of the process is to complete an Annual Allowance Charge Compensation Policy Form, which is now available in England and will be available early next year in Wales.
The deadline for completing the compensation charge form is not until 31 March 2022.
This will allow affected clinicians (doctors and dentists) to claim the contractual payment at retirement equivalent to any reduction in pension arising from the scheme pays charge.
Note that the form should only be used by GPs and Clinicians. Dentists will need to apply online via Dental Services.
NHS England has promised that compensation will be paid to cover the deduction. This promise will apparently take the form of a contractually binding commitment, backed by the NHS and the Secretary of State for Health and Social Care.
Finally, also note that the scheme covers NHS England and NHS Wales, but not NHS Scotland.
Scheme Pays Election Form
Compensation Form (not available at the time of publishing)
Compensation Policy
Compensation Policy Infographic (clinicians, including dentists)
Compensation Policy Infographic (GPs)
Please send us your questions! It's easy to do. Just send an email to us here (and if we publish it we'll make it anonymous).
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Wrap-Up - Gratitude and a Slower Pace To Life
It's safe to say that 2020 has been one of the most challenging years that many of us will ever face.
I believe that with every negative it's important to look at the 'glass half full', otherwise it could be easy to go into and remain in a downward spiral.
I've only been into the office a handful of times since March so, apart from not being able to meet clients and contacts in person, it's been business as usual in many respects.
This period has also given me more opportunity to reflect on what I'm grateful for (glass half full), as my usual life of rushing around with work / kids has been replaced by a slower pace.
I'm grateful for, amongst others:
- My family
- My work
- Clients entrusting me to help them with such an important area of their lives
- The many great professionals I meet through my work
- My friends
- My health and the health of those in my life
- Having the health so that I can keep fit, which means that I can be there for others
On the work front, even with Covid some of my dental clients have successfully sold their practices this year (or are in the process of doing so) and are now officially on 'wind down', with the majority planning to work another 2-3 years (as part of the hand over) and reduce their hours at the same time.
Thinking of one or two in particular, handing over the business responsibility has certainly put a smile on their faces! (definitely glass half full!)
Whatever your plans are for this Christmas and New Year, we wish you all the best and hope you have a relaxing time with your loved ones.
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Disclaimer
Comments made are based on current tax law and may, (in fact almost certainly will), change in the months / years
ahead. Material supplied has been carefully checked for accuracy but no responsibility can be accepted for
inaccuracies or errors or from subsequent use of this material.
Specific professional advice must always be sought based on your own individual circumstances. As always, the
buck stops with you. The information contained within this email is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
We recommend you take independent advice before making any investment decisions. The writers do not accept any responsibility for any loss suffered by readers as a result of any such decisions.
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