In the podcast published on 13th March I spoke to NHS pensions expert Paul Gordon. He explained all the changes that are coming as a result of the recent consultation. You can listen to everything he had to say here. But then the Chancellor of the Exchequer announced further changes in his March budget! I caught up again with Paul with more questions about what it all means, and he gives his answers below.
Were you expecting all the recent changes to the NHS Pension?
What an amazing few weeks for those with NHS Pensions, two consultations and a Budget which left many, including me, staggered. Normally the pace of change when it comes to the NHS pensions is, at best, glacial, so it is incredible for so much change to have been packed into such a short space of time!
What changes are being made to the Annual Allowance?
The Annual Allowance is the amount you are able to grow your pension by each year without incurring any tax charge. This amount has been increased from £40,000 to £60,000 per annum. At first glance, this is excellent news but please note, there could still be tax charges and so the review of your existing benefits is paramount. Those with higher incomes will still see the standard allowance reduced as a result of the Tapered Annual Allowance which is to remain.
What about changes to the Lifetime Allowance?
The Lifetime Allowance is the value your total pension pot is allowed to reach before it incurs any tax charges. Once this value is breached tax charges then start to apply. However, the Chancellor has just announced that the Lifetime Allowance is to be abolished. This could lead to the saving of thousands of pounds throughout retirement with the maximum tax-free lump sum remaining at £268,275, although those with Lifetime Allowance Protection already in place may be able to access a higher level.
Is it true that the need for 24-hour retirement has been abolished?
We now have the feedback regarding the December 2022 consultation which removes the need for 24-hour retirement. This is called the Partial Retirement option, and will be implemented from October 2023. This will allow access to the NHS Pension for GPs, partners and all NHS staff without the requirement for 24-Hour retirement, which for single-handed practices or those in dispute with the ICB could prove to be extremely useful!
Has the inflation issue been fixed?
A huge cause of concern was that the growth of individuals’ pension pots would exceed the Annual Allowance in 2022/23 simply because of the inflationary rise it would receive. This is because historically the ‘allowed’ growth for inflation was based on the rate from a different year to that in which the growth was incurred. There has now been adjusted in a way that will effectively allow the use of the higher CPI figure for the current year by delaying the addition of the growth until the 6th April, thus nullifying the issue. However, it is imperative to secure updated Annual Allowance Growth histories from NHSBSA and to ensure membership details are correct ahead of the various changes ahead.
Where can people find out more information about their own pension position?
I strongly recommend everyone obtains a statement from the Total Rewards Statement website: www.totalrewardsstatements.nhs.uk
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