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<p>The Government is committed to ensuring that hard-working NHS staff do not find
themselves reducing their work commitments due to the interaction between their pay,
their pension, and the relevant tax regime.</p><p> </p><p>The NHS pension scheme is
one of the most generous schemes available, and protects pensions in payment by increasing
them by CPI and revalues accrued CARE benefits by CPI+1.5% each year.</p><p> </p><p>Pensions
tax relief one of the most expensive reliefs in the personal tax system. In 2019/20
Income Tax relief on total contributions and National Insurance relief on employer
contributions for pension savings cost the Exchequer £61 billion, with around 60 per
cent of Income Tax relieved at the Higher and Additional rates. The annual allowance
helps to ensure that the highest earning pension savers do not receive a disproportionate
benefit.</p><p> </p><p>99 per cent of pension savers make annual contributions below
£40,000, the level of standard annual allowance which has applied from 2014/15. Individuals
who breach the annual allowance on tax-relieved pension savings can also use an option
called ‘scheme pays’, under which they can require their pension scheme to pay their
annual allowance tax charge now (in return for an actuarially fair reduction in their
pension), provided that the annual allowance charge is at least £2,000 and they have
exceeded the annual allowance of £40,000. In England and Wales, the NHS Pension Scheme
goes further, allowing Scheme Pays to be used on any annual allowance charges relating
to accrual in that scheme.</p>
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