NHS pension, temporary pay rise, annual allowance HELP
Discussion
I'm currently part of the NHS Pension 1995 and 2015 schemes.
For the next 12 months I will get a temporary 10% pay rise (£10k) for taking on extra work and responsibility.
By my calculations this will mean my NHS 1995 pension pot will increase by £48k by the end of the financial year, even though I haven't contributed anything into it, my current NHS 2015 pot is likely to increase by £35k.
So £48+£35 less £40k annual allowance = £43k tax liability = £17k
So a £10k pay rise will cost me £17k?
I have a little annual allowance left over from the past 3 years, but not a great deal.
Am I missing something??
For the next 12 months I will get a temporary 10% pay rise (£10k) for taking on extra work and responsibility.
By my calculations this will mean my NHS 1995 pension pot will increase by £48k by the end of the financial year, even though I haven't contributed anything into it, my current NHS 2015 pot is likely to increase by £35k.
So £48+£35 less £40k annual allowance = £43k tax liability = £17k
So a £10k pay rise will cost me £17k?
I have a little annual allowance left over from the past 3 years, but not a great deal.
Am I missing something??
foiled said:
I'm currently part of the NHS Pension 1995 and 2015 schemes.
For the next 12 months I will get a temporary 10% pay rise (£10k) for taking on extra work and responsibility.
By my calculations this will mean my NHS 1995 pension pot will increase by £48k by the end of the financial year, even though I haven't contributed anything into it, my current NHS 2015 pot is likely to increase by £35k.
So £48+£35 less £40k annual allowance = £43k tax liability = £17k
So a £10k pay rise will cost me £17k?
I have a little annual allowance left over from the past 3 years, but not a great deal.
Am I missing something??
The NHS / you are putting in £83k a year to your pensions, doesn’t sound right.For the next 12 months I will get a temporary 10% pay rise (£10k) for taking on extra work and responsibility.
By my calculations this will mean my NHS 1995 pension pot will increase by £48k by the end of the financial year, even though I haven't contributed anything into it, my current NHS 2015 pot is likely to increase by £35k.
So £48+£35 less £40k annual allowance = £43k tax liability = £17k
So a £10k pay rise will cost me £17k?
I have a little annual allowance left over from the past 3 years, but not a great deal.
Am I missing something??
I think you may be taking what your funds build over the year in gains into account which has no relevance to the £40k allowance.
The £40k allowance is referring to what employer / employee pays into the pension in that tax year.
Open to be shot down if the above is not correct.
I would have to sit down with a calculator and paper to guesstimate how you got to the figures and that’s too much effort - but two observations:
1. The calculations will be done by tax year so if starting in October you only have six months of the increase this year and six months in next tax year. That should make it easier.
But
2. If it’s pushing you over £100k taxable income then for the first £23,700 extra the marginal tax rate is 60% due to loss of personal allowance
Any chance of the extra pay being non-pensionable? Probably not but might be worth asking
1. The calculations will be done by tax year so if starting in October you only have six months of the increase this year and six months in next tax year. That should make it easier.
But
2. If it’s pushing you over £100k taxable income then for the first £23,700 extra the marginal tax rate is 60% due to loss of personal allowance
Any chance of the extra pay being non-pensionable? Probably not but might be worth asking
As posted above, on what basis are you calculating the contribution OP?
I think there are two things here: a) annual pension contribution and b) the idea of a "pot".
The former should simply be the combined value of your pension contributions and those of the employer in a given year. These are at the same rates regardless of which year's Scheme you are in - and I'm guessing that these will be 13.5% (you) and 14.38% (employer). On the basis of what you've posted above, I think the total will be safely less than £40k - unless you've made additional contributions.
On the second point, there is no defined "pot" value for the NHS Schemes to my knowledge. They do have a notional annuity value, as shown in the Total Reward Statement; have you possibly interpreted this as a "pot"? I have strong reservations about showing a notional annuity value - and I don't think it can be considered as far as tax is concerned. (They are just trying to make the point that buying a safe annual income would cost lots on the commerical annuity markets. The conventional method to calculate taxable value / "pot" is to take the projected annual payment of the pension and times it by 20).
I'm very keen to learn whether I'm wrong on any of this, as I'm in a similar position to the OP by the sound of things - less the 10% temporary pay rise...I just do all my extra work for free!!
I think there are two things here: a) annual pension contribution and b) the idea of a "pot".
The former should simply be the combined value of your pension contributions and those of the employer in a given year. These are at the same rates regardless of which year's Scheme you are in - and I'm guessing that these will be 13.5% (you) and 14.38% (employer). On the basis of what you've posted above, I think the total will be safely less than £40k - unless you've made additional contributions.
On the second point, there is no defined "pot" value for the NHS Schemes to my knowledge. They do have a notional annuity value, as shown in the Total Reward Statement; have you possibly interpreted this as a "pot"? I have strong reservations about showing a notional annuity value - and I don't think it can be considered as far as tax is concerned. (They are just trying to make the point that buying a safe annual income would cost lots on the commerical annuity markets. The conventional method to calculate taxable value / "pot" is to take the projected annual payment of the pension and times it by 20).
I'm very keen to learn whether I'm wrong on any of this, as I'm in a similar position to the OP by the sound of things - less the 10% temporary pay rise...I just do all my extra work for free!!
The Cardinal said:
As posted above, on what basis are you calculating the contribution OP?
I think there are two things here: a) annual pension contribution and b) the idea of a "pot".
The former should simply be the combined value of your pension contributions and those of the employer in a given year. These are at the same rates regardless of which year's Scheme you are in - and I'm guessing that these will be 13.5% (you) and 14.38% (employer). On the basis of what you've posted above, I think the total will be safely less than £40k - unless you've made additional contributions.
On the second point, there is no defined "pot" value for the NHS Schemes to my knowledge. They do have a notional annuity value, as shown in the Total Reward Statement; have you possibly interpreted this as a "pot"? I have strong reservations about showing a notional annuity value - and I don't think it can be considered as far as tax is concerned. (They are just trying to make the point that buying a safe annual income would cost lots on the commerical annuity markets. The conventional method to calculate taxable value / "pot" is to take the projected annual payment of the pension and times it by 20).
I'm very keen to learn whether I'm wrong on any of this, as I'm in a similar position to the OP by the sound of things - less the 10% temporary pay rise...I just do all my extra work for free!!
The market rate would be to take the (inflation-linked) pension and multiply by 40. However, for some strange reason, DB schemes can get away with a multiple of 20 for comparison against the lifetime limit...I think there are two things here: a) annual pension contribution and b) the idea of a "pot".
The former should simply be the combined value of your pension contributions and those of the employer in a given year. These are at the same rates regardless of which year's Scheme you are in - and I'm guessing that these will be 13.5% (you) and 14.38% (employer). On the basis of what you've posted above, I think the total will be safely less than £40k - unless you've made additional contributions.
On the second point, there is no defined "pot" value for the NHS Schemes to my knowledge. They do have a notional annuity value, as shown in the Total Reward Statement; have you possibly interpreted this as a "pot"? I have strong reservations about showing a notional annuity value - and I don't think it can be considered as far as tax is concerned. (They are just trying to make the point that buying a safe annual income would cost lots on the commerical annuity markets. The conventional method to calculate taxable value / "pot" is to take the projected annual payment of the pension and times it by 20).
I'm very keen to learn whether I'm wrong on any of this, as I'm in a similar position to the OP by the sound of things - less the 10% temporary pay rise...I just do all my extra work for free!!
For a defined benefit contribution, the annual allowance is calculated not by the contributions in, but what they term “pensions input”
So pension input period current tax year - pension input period last tax year = annual allowance
Pension input is calculated as (annual pension x 16) + lump sum
So £25kx16 + £75k = £475k
Then pay increase of 10%
£27.5kx16 + £82.5k = £522.5
Therefore annual allowance of my 1995 nhs pot is £47.5k
Remember, I’ve personally, not contributed anything into that pot for the past tax year, or since 2015 in fact
Added to this, will be my actual pension contributions of my current 2015 nhs pension, which I estimate to be £35k
So £47.5 + £35 = £82.5k annual pension contribution
If it was a permanent pay rise, it would be worth just paying the extra tax bill, as I’d benefit in the long run, due to a bigger pension, but as it’s only a year pay rise (back dated to April) then there won’t be any increase in my final salary pension, as I’m not within 3 years of retirement.
Sorry long post, but shows how a temporary relatively small pay rise, can stuff you in a final salary scheme.
https://www.nhsbsa.nhs.uk/member-hub/annual-allowa...
So pension input period current tax year - pension input period last tax year = annual allowance
Pension input is calculated as (annual pension x 16) + lump sum
So £25kx16 + £75k = £475k
Then pay increase of 10%
£27.5kx16 + £82.5k = £522.5
Therefore annual allowance of my 1995 nhs pot is £47.5k
Remember, I’ve personally, not contributed anything into that pot for the past tax year, or since 2015 in fact
Added to this, will be my actual pension contributions of my current 2015 nhs pension, which I estimate to be £35k
So £47.5 + £35 = £82.5k annual pension contribution
If it was a permanent pay rise, it would be worth just paying the extra tax bill, as I’d benefit in the long run, due to a bigger pension, but as it’s only a year pay rise (back dated to April) then there won’t be any increase in my final salary pension, as I’m not within 3 years of retirement.
Sorry long post, but shows how a temporary relatively small pay rise, can stuff you in a final salary scheme.
https://www.nhsbsa.nhs.uk/member-hub/annual-allowa...
oop north said:
2. If it’s pushing you over £100k taxable income then for the first £23,700 extra the marginal tax rate is 60% due to loss of personal allowance
Any chance of the extra pay being non-pensionable? Probably not but might be worth asking
This crosses by mind too, but as I understand it taxable pay is calculated after pension contributions?Any chance of the extra pay being non-pensionable? Probably not but might be worth asking
If so, I’m just about ok, if not I’m properly stuffed.
With regards to the pension annual allowance, it seems that my only options would be to decline the pay rise, or as for a non pensionable allowance of eqivalent money
You could mitigate this temporary salary rise by:
-Taking on a salary sacrifice car, bike , computer, child care vouchers etc.
- Also, you could temporariy leave the (2015) scheme, I believe you can subsequently rejoin within 12 months without loss of benefits. Typically most consultants will reach the lifetime 1m limit in their fifties so temporarily leaving shouldn't have much impact on your ultimate pension.
Definitely worthwhile speaking to a IFA who specialises in the NHS pension.
-Taking on a salary sacrifice car, bike , computer, child care vouchers etc.
- Also, you could temporariy leave the (2015) scheme, I believe you can subsequently rejoin within 12 months without loss of benefits. Typically most consultants will reach the lifetime 1m limit in their fifties so temporarily leaving shouldn't have much impact on your ultimate pension.
Definitely worthwhile speaking to a IFA who specialises in the NHS pension.
Different situation but same question....
Just got a letter from NHS pensions department, states my pension input amount for 1995/2008 scheme last year was £44,600, so above the £40k standard allowance for all schemes. Strangely year before the amount was just over £26k so how its jumped £20k in a year I have no idea.
The letter says I should contact my accountant to check tax implications- I haven't got an accountant and I haven't paid anything into the 2008 scheme since 2015 as am on the new scheme.....
I have also taken on an 10% temporary pay increase for the last 12 month? That may/may not stay, am still deciding if the extra stress is worth it.
Anyone any advice?? I still dont think I earn enough to justify employing the services on an accountant.
Just got a letter from NHS pensions department, states my pension input amount for 1995/2008 scheme last year was £44,600, so above the £40k standard allowance for all schemes. Strangely year before the amount was just over £26k so how its jumped £20k in a year I have no idea.
The letter says I should contact my accountant to check tax implications- I haven't got an accountant and I haven't paid anything into the 2008 scheme since 2015 as am on the new scheme.....
I have also taken on an 10% temporary pay increase for the last 12 month? That may/may not stay, am still deciding if the extra stress is worth it.
Anyone any advice?? I still dont think I earn enough to justify employing the services on an accountant.
Edited by gangzoom on Sunday 7th October 09:28
gangzoom said:
Different situation but same question....
Just got a letter from NHS pensions department, states my pension input amount for 1995/2008 scheme last year was £44,600, so above the £40k standard allowance for all schemes. Strangely year before the amount was just over £26k so how its jumped £20k in a year I have no idea.
The letter says I should contact my accountant to check tax implications- I haven't got an accountant and I haven't paid anything into the 2008 scheme since 2015 as am on the new scheme.....
Anyone any advice?? I still dont think I earn enough to justify employing the services on an accountant.
Seems a big jump, but as I’ve shown, a small pay rise can lead to a big jump in annual allowance.Just got a letter from NHS pensions department, states my pension input amount for 1995/2008 scheme last year was £44,600, so above the £40k standard allowance for all schemes. Strangely year before the amount was just over £26k so how its jumped £20k in a year I have no idea.
The letter says I should contact my accountant to check tax implications- I haven't got an accountant and I haven't paid anything into the 2008 scheme since 2015 as am on the new scheme.....
Anyone any advice?? I still dont think I earn enough to justify employing the services on an accountant.
Have you had a pay rise last year? Do you have many years in the 1995 scheme?
You can use unused allowance from the previous 3 years, so it sounds like you should be ok. Previous years allowance will be shown on the statement
I've been through all this.
You have to ask for a summary of growth from each pension with the NHS. Ask the NHS Business Services Authority. They take ages to do it and are about 15 months behind the curve.
There are two NHS pensions, The 1995/2008 Scheme which is closed to new money and is final salary, but can still grow. And the 2015 scheme which is open to contributions and is not final salary and can still grow. They do calculate the growth for you on each pot, it seems voodoo, but it's in black and white. Sometimes the growth in my pots was £50k+ in a year as CPI/RPI/Tea leaves were used.
Legally you are then obliged to "do the maths" on whether you are using all of your current £40k growth for 2018, and/or have any carry-over from previous years to be utilised. If you have exhausted all of this, then you have to pay tax on the >£40k growth (combined from both pensions)
Legally you have to "do the maths" yourself and self-declare the growth and pay the tax to which you are liable.
I couldn't do the maths, so I asked my accountant to do it and they were very helpful and rolled it into my annual fee.
I very much doubt you will fall into a problem with a 1 year 10% pay rise in the NHS, but you can't know until you check. You have to check yourself once you have the numbers, and the HMRC will not tell you about the liability, but as usual will threaten to punish if you don;t pay and they later find out a payment was due.
You have to ask for a summary of growth from each pension with the NHS. Ask the NHS Business Services Authority. They take ages to do it and are about 15 months behind the curve.
There are two NHS pensions, The 1995/2008 Scheme which is closed to new money and is final salary, but can still grow. And the 2015 scheme which is open to contributions and is not final salary and can still grow. They do calculate the growth for you on each pot, it seems voodoo, but it's in black and white. Sometimes the growth in my pots was £50k+ in a year as CPI/RPI/Tea leaves were used.
Legally you are then obliged to "do the maths" on whether you are using all of your current £40k growth for 2018, and/or have any carry-over from previous years to be utilised. If you have exhausted all of this, then you have to pay tax on the >£40k growth (combined from both pensions)
Legally you have to "do the maths" yourself and self-declare the growth and pay the tax to which you are liable.
I couldn't do the maths, so I asked my accountant to do it and they were very helpful and rolled it into my annual fee.
I very much doubt you will fall into a problem with a 1 year 10% pay rise in the NHS, but you can't know until you check. You have to check yourself once you have the numbers, and the HMRC will not tell you about the liability, but as usual will threaten to punish if you don;t pay and they later find out a payment was due.
Edited by The_Doc on Monday 8th October 13:25
gangzoom said:
Different situation but same question....
Just got a letter from NHS pensions department, states my pension input amount for 1995/2008 scheme last year was £44,600, so above the £40k standard allowance for all schemes. Strangely year before the amount was just over £26k so how its jumped £20k in a year I have no idea.
The letter says I should contact my accountant to check tax implications- I haven't got an accountant and I haven't paid anything into the 2008 scheme since 2015 as am on the new scheme.....
I have also taken on an 10% temporary pay increase for the last 12 month? That may/may not stay, am still deciding if the extra stress is worth it.
Anyone any advice?? I still dont think I earn enough to justify employing the services on an accountant.
I’ve just had exactly the same letter. Total contributions in past 3 years are £33k, £10k and last year £43k. My personal contributions have always been around £7.5k with employer contributing approx £10k so like the above post I’ve no idea why I’ve jumped above the £40k mark. Just got a letter from NHS pensions department, states my pension input amount for 1995/2008 scheme last year was £44,600, so above the £40k standard allowance for all schemes. Strangely year before the amount was just over £26k so how its jumped £20k in a year I have no idea.
The letter says I should contact my accountant to check tax implications- I haven't got an accountant and I haven't paid anything into the 2008 scheme since 2015 as am on the new scheme.....
I have also taken on an 10% temporary pay increase for the last 12 month? That may/may not stay, am still deciding if the extra stress is worth it.
Anyone any advice?? I still dont think I earn enough to justify employing the services on an accountant.
Edited by gangzoom on Sunday 7th October 09:28
Asked my accountant and he said I won’t be due a tax charge as I can use this years “overspend” and place it in last years where I didn’t contribute the full amount.
Still not sure why my contributions are varying so much year on year though but at least I’m not due a tax charge.
The_Doc said:
I've been through all this.
You have to ask for a summary of growth from each pension with the NHS. Ask the NHS Business Services Authority. They take ages to do it and are about 15 months behind the curve.
There are two NHS pensions, The 1995/2008 Scheme which is closed to new money and is final salary, but can still grow. And the 2015 scheme which is open to contributions and is not final salary and can still grow. They do calculate the growth for you on each pot, it seems voodoo, but it's in black and white. Sometimes the growth in my pots was £50k+ in a year as CPI/RPI/Tea leaves were used.
Legally you are then obliged to "do the maths" on whether you are using all of your current £40k growth for 2018, and/or have any carry-over from previous years to be utilised. If you have exhausted all of this, then you have to pay tax on the >£40k growth (combined from both pensions)
Legally you have to "do the maths" yourself and self-declare the growth and pay the tax to which you are liable.
I couldn't do the maths, so I asked my accountant to do it and they were very helpful and rolled it into my annual fee.
I very much doubt you will fall into a problem with a 1 year 10% pay rise in the NHS, but you can't know until you check. You have to check yourself once you have the numbers, and the HMRC will not tell you about the liability, but as usual will threaten to punish if you don;t pay and they later find out a payment was due.
This is very helpful thank you, but still, how the heck has my 1995 pension gone from You have to ask for a summary of growth from each pension with the NHS. Ask the NHS Business Services Authority. They take ages to do it and are about 15 months behind the curve.
There are two NHS pensions, The 1995/2008 Scheme which is closed to new money and is final salary, but can still grow. And the 2015 scheme which is open to contributions and is not final salary and can still grow. They do calculate the growth for you on each pot, it seems voodoo, but it's in black and white. Sometimes the growth in my pots was £50k+ in a year as CPI/RPI/Tea leaves were used.
Legally you are then obliged to "do the maths" on whether you are using all of your current £40k growth for 2018, and/or have any carry-over from previous years to be utilised. If you have exhausted all of this, then you have to pay tax on the >£40k growth (combined from both pensions)
Legally you have to "do the maths" yourself and self-declare the growth and pay the tax to which you are liable.
I couldn't do the maths, so I asked my accountant to do it and they were very helpful and rolled it into my annual fee.
I very much doubt you will fall into a problem with a 1 year 10% pay rise in the NHS, but you can't know until you check. You have to check yourself once you have the numbers, and the HMRC will not tell you about the liability, but as usual will threaten to punish if you don;t pay and they later find out a payment was due.
Edited by The_Doc on Monday 8th October 13:25
£57k - £85k in 2014-15,
then £85k to £89k in 2015-16,
then £89k to £85k in 2016-17
and then £85k to £110k in 2017-18?
I would expect a small amount of growth (5% maybe) each year but wouldn’t expect it to fluctuate so much.
I’m not contributing to this pension as it’s closed. I assume the NHS is no longer contributing too???? How has my pot grown by 30% last year?
It’s not particularly worrying me as I’m still 20 years away from retirement but it would be nice to understand it
Advice on this post has been very helpful 
.
Am going to ignore the letters I got, at least it did show me the size of my pension pot is pretty decent and am still nearly 30 years away from retirement!!!
Pretty sure I will need an accountant at some point though as the total value of the pension will hit the max tax free amount point long before any retirement plan.
.Am going to ignore the letters I got, at least it did show me the size of my pension pot is pretty decent and am still nearly 30 years away from retirement!!!
Pretty sure I will need an accountant at some point though as the total value of the pension will hit the max tax free amount point long before any retirement plan.
From today's HSJ:
A quarter of a million NHS workers opted out of the pension scheme over the past three years, with experts blaming a “punitive” government tax regime and the current cost of living, HSJ can reveal.
An HSJ investigation found 245,561 people opted out of the scheme between 2015 and 2017, with 102,755 opting out in 2016 alone, representing a 78 per cent increase from the previous year.
The government reduced the amount of tax relief that can be applied to pension schemes in April 2016 and dropped the lifetime allowance to £1m.
The figures suggest the government’s pension reform may well have had a significant impact on the number of opt outs in 2016.
The group with the highest increase in opt outs were 46-55 year olds, with a 94 per cent increase in 2016. This was followed by the 16-25 year old and 36-45 year old age groups, which saw an 86 per cent and 83 per cent increase in opt outs respectively.
HSJ requested data from NHS Business Service Authority from 2012 but was told the information from the period up until July 2014 was only held in paper form, and was destroyed in line with records management practice.
Although less than 2016, 2017 also saw a significant number of opt outs, with 26-35 year olds the age group with the highest number, at almost 30,000.
Danny Mortimer, chief executive of NHS Employers, told HSJ that concern was mounting that NHS staff are considering leaving the pension scheme, “particularly senior clinical staff”.
“Employers would like to see more flexibility in the pension scheme to allow staff to differently manage contributions to reflect and support their personal priorities,” Mr Mortimer said. “We believe that this would further modernise our offer to staff, and assist retention for the scheme and more generally for employers.”
Jon Restell, chief executive of union Managers in Practice, said that as well as the limit on the annual allowance, the government’s pay policy would have played a part, especially for staff in lower pay bands.
He said: “The large numbers in younger members may be a result of auto enrolment and these lower pay band salary pressures.”
Mr Restell added that although there is no “overwhelming evidence” that the annual allowance is driving opt outs from the pension scheme, he stressed it is “clearly a factor for many staff, especially higher earners”.
“The annual allowance predominantly hits members of public sector schemes which retain a link – in part or full – to final salary,” Mr Restell said.
He called for the government to make the tax regime “less punitive in the upcoming Budget”.
“The NHS pension scheme should do more to help members reduce the impact of the tax regime,” Mr Restell said. “These measures would probably increase revenues to the Treasury by keeping people in the scheme paying contributions.”
Andy Haynes, executive medical director at Sherwood Forest Hospitals Foundation Trust, told HSJ the pension changes are resulting in staff choosing to retire, and described this as “a significant issue for people”.
“Those consultants are capable of delivering a lot of work because they are so experienced,” Dr Haynes said.
He added there needs to be “clear guidance” from the government and access to “quality advice” around the pension scheme.
One 32 year old NHS finance manager who wished to remain anonymous told HSJ they opted out of the scheme when they were 28 for financial reasons – though this was prior to the rule change in 2016.
“I need the money now as I have a young family and you basically put a hold on your future as retirement is 35+ years away,” the person said.
“What doesn’t help with the [pension] scheme is that the percentage [contributions] increases as your salary goes up so you don’t actually see an improvement in your net pay,” he said.
“The increase in contributions penalises the bigger earners further on the assumption they have more disposable income. The increased percentage contributed to my decision to leave but the main issue is the current cost of living.”
A quarter of a million NHS workers opted out of the pension scheme over the past three years, with experts blaming a “punitive” government tax regime and the current cost of living, HSJ can reveal.
An HSJ investigation found 245,561 people opted out of the scheme between 2015 and 2017, with 102,755 opting out in 2016 alone, representing a 78 per cent increase from the previous year.
The government reduced the amount of tax relief that can be applied to pension schemes in April 2016 and dropped the lifetime allowance to £1m.
The figures suggest the government’s pension reform may well have had a significant impact on the number of opt outs in 2016.
The group with the highest increase in opt outs were 46-55 year olds, with a 94 per cent increase in 2016. This was followed by the 16-25 year old and 36-45 year old age groups, which saw an 86 per cent and 83 per cent increase in opt outs respectively.
HSJ requested data from NHS Business Service Authority from 2012 but was told the information from the period up until July 2014 was only held in paper form, and was destroyed in line with records management practice.
Although less than 2016, 2017 also saw a significant number of opt outs, with 26-35 year olds the age group with the highest number, at almost 30,000.
Danny Mortimer, chief executive of NHS Employers, told HSJ that concern was mounting that NHS staff are considering leaving the pension scheme, “particularly senior clinical staff”.
“Employers would like to see more flexibility in the pension scheme to allow staff to differently manage contributions to reflect and support their personal priorities,” Mr Mortimer said. “We believe that this would further modernise our offer to staff, and assist retention for the scheme and more generally for employers.”
Jon Restell, chief executive of union Managers in Practice, said that as well as the limit on the annual allowance, the government’s pay policy would have played a part, especially for staff in lower pay bands.
He said: “The large numbers in younger members may be a result of auto enrolment and these lower pay band salary pressures.”
Mr Restell added that although there is no “overwhelming evidence” that the annual allowance is driving opt outs from the pension scheme, he stressed it is “clearly a factor for many staff, especially higher earners”.
“The annual allowance predominantly hits members of public sector schemes which retain a link – in part or full – to final salary,” Mr Restell said.
He called for the government to make the tax regime “less punitive in the upcoming Budget”.
“The NHS pension scheme should do more to help members reduce the impact of the tax regime,” Mr Restell said. “These measures would probably increase revenues to the Treasury by keeping people in the scheme paying contributions.”
Andy Haynes, executive medical director at Sherwood Forest Hospitals Foundation Trust, told HSJ the pension changes are resulting in staff choosing to retire, and described this as “a significant issue for people”.
“Those consultants are capable of delivering a lot of work because they are so experienced,” Dr Haynes said.
He added there needs to be “clear guidance” from the government and access to “quality advice” around the pension scheme.
One 32 year old NHS finance manager who wished to remain anonymous told HSJ they opted out of the scheme when they were 28 for financial reasons – though this was prior to the rule change in 2016.
“I need the money now as I have a young family and you basically put a hold on your future as retirement is 35+ years away,” the person said.
“What doesn’t help with the [pension] scheme is that the percentage [contributions] increases as your salary goes up so you don’t actually see an improvement in your net pay,” he said.
“The increase in contributions penalises the bigger earners further on the assumption they have more disposable income. The increased percentage contributed to my decision to leave but the main issue is the current cost of living.”
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