Will pension savings changes help the NHS workforce crisis?

In the budget today the chancellor has announced measures on pension savings that may help ease some of the NHS workforce crisis.

The Annual Allowance (AA) has been increased from £40,000 to £60,000.

The Lifetime Allowance (LTA) has been abolished altogether from April 2023 instead of the previous £1,073,100 level.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

For several years hospital consultants, GPs and other senior executives within the NHS have suffered from tax charges caused when their pension savings have broken these allowance limits. This has caused many to take drastic measures – retiring early from their posts, reducing their working commitments or trying to manage the charges by hopping in and out of the pension scheme. Thus, this has seen a reduced workforce from some of the most experienced and knowledgeable doctors and NHS staff.

The hope is that by increasing these allowances, combined with the other recent flexibilities introduced to the NHS pension scheme, it will encourage more doctors to remain in the profession longer and retain or increase their work commitments.

Unfortunately, the calculation of whether these limits have been breached in the NHS Pension scheme, is very complicated. For the AA position, it is not as simple as the contributions being paid in but a measure of the growth in the pension.

There is a further complication for the AA position as the contribution limit can be reduced further below the above standard amounts, by a tapering for those earning above £260,000.  

For those individuals that have taken action already, this change allows them to revisit their plans for future pension planning, but specialist expert advice should be sought in order to fully understand the options and implications in each personal circumstance.

This article should not be construed as a personalised recommendation and no action should be taken without seeking further, formal advice.

MHA Moore and Smalley is regulated by the Financial Conduct Authority, FCA registration number 448716. 

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