Graham Crossley
Quilter Financial Adviser
HCSA teamed up with NHS Pension expert Graham Crossley of Quilter Financial Advisers to deliver a free webinar for members looking at the impact on pensions tax of the recently announced pay award.
This webinar covers:
- The 2024/25 pay award
- Backdated pay rises: potential issues
- The 60% tax trap and its impact on senior doctors
- Annual Allowance and the taper trap
- McCloud Remedy impact on Annual Allowance.
Watch the webinar recording
Follow-up questions
Following the webinar, Quilter also provided answers to questions posed by HCSA members. The responses are listed below:
Does Early Retirement Reduction Buy Out (ERRBO) reduce your taxable income for purposes of childcare eligibility?
ERRBO is an option for the 2015 scheme which allows you to buy out the reduction that would apply if you chose to claim your NHS pension before normal pension age. Tax relief is granted on ERRBO contributions, so ERRBO contributions reduce your taxable income.
Can I use a personal pension to settle any annual allowance tax charges from my NHS pension?
You can pay annual allowance tax charges using a method called Scheme Pays, where your pension scheme pays the charge for you. Some personal pension schemes, like the Quilter Collective Retirement Account, offer flexibility within their ‘voluntary scheme pays’ facility to settle the annual allowance tax charges derived from other pension schemes, such as the NHS pension. So, yes, you can use a personal pension to pay these tax charges, but it depends on whether your provider offers this option.
Can negative growth in previous 3 years be added to annual allowance in the following years?
Negative growth occurs where wage inflation is less than CPI, as the value of pension benefits reduce in real terms. Historically this negative growth was set to zero, however there was a Statutory Instrument that came into effect from 6th April 2024, that allows all negative pension growth in the 1995/2008 NHS pension to be used to offset any positive growth 2015 NHS pension, within that tax year.
Can pension contributions be backdated?
There are some scenarios where pension contributions can be backdated, however these are typical confined to payroll errors.
If you opted out of the NHS Pension Scheme due to the discrimination identified in the McCloud judgment, you might be able to reinstate some or all of your service between October 2014 and April 2022. Further information can be found on the NHSBSA website.
I plan on taking my 95 pension and continue to work full-time. Can I use part of my lump sum to pay an extra lump into my private pension?
HMRC has some strict rules about lump sum recycling.
The recycling rules are designed to prevent the misuse of tax rules by stopping individuals from generating excessive tax relief by using the lump sum to make additional, tax-relieved contributions to the pension scheme.
If the recycling rule applies, all or part of the lump sum may be classified as an unauthorised member payment for tax purposes and be subject to an unauthorised payment charge.
The rules typically apply where lump sum payments exceed £7,500 and the cumulative amount of the additional contributions exceeds 30% of the pension commencement lump sum.
What is the latest you can retire and claim the 1995 section pension?
The maximum age that you can remain in the 1995 section is up to the day before your 75th birthday, unless you are a Mental Health Officer (MHO) or Special Class (SC) member.
However, it is important to understand that the normal pension age is 60 (55 for MHO/SC) and, unlike the 2008 section and 2015 scheme, there are no late retirement factors in the 1995 section, and the pension award is not typically backdated. So, if you do not take your 1995 section pension benefits at normal pension age, then those payments that would have been made will be forever lost.
Visit www.quilter.com/hcsa to arrange a complimentary initial financial consultation.