Doctors caught out by changes to pension contribution limits will have their tax paid for them by the NHS – for the current tax year only.

The emergency measure will allow clinical staff to opt for the pension scheme to cover their excess charges resulting from the ‘annual allowance’ (known as ‘Scheme Pays’) for the 2019/20 tax year. They should then be compensated by the NHS upon their retirement.

The annual allowance limits the amount of tax-free pension savings which can be accrued per year. The standard allowance is £40,000 but in 2016, a ‘tapered’ annual allowance was introduced. This reduces the limit down further on a sliding scale to as little as £10,000 for the highest earners.

NHS chief executive Simon Stevens said the surprise in-year move was necessary because the election, and subsequent deferral of the Budget, had meant that a long-term solution to the problems caused by the ‘tapered annual allowance’ was unlikely to be found before April 2020.

This temporary measure could come as a relief to doctors facing punitive tax bills in the short-term – although there are a number of grey areas which could prove challenging. For example, the tax will be covered only on charges arising from excess contributions to NHS pensions – not on personal pensions. There are also locally-agreed Trust policies which will impact pensions and tax positions at an individual level.

We are also still awaiting further details on the consultation into pension flexibility launched this summer.

If you are in any doubt about your own position, please contact one of our adviser team who are always willing to help and to explain matters clearly and simply. Call us on 020 7636 7006.