NHS Pension Rules are Catching Up

It’s good news for some as last week, the NHS announced some much sought after changes to its Pension Scheme for high-income earners. After changes announced by the government in 2016 caused a great deal of financial stress, our Director Flora shares her thoughts on what the changes in the policy could mean for you…

 “In April 2016, the government announced its plans to taper the Annual Pension Allowance for high income earners (those who are earning over £150,000), reducing it from £40,000 to just £10,000. Although only a small number have been affected by that change, the implications have been huge, with contributions breaching the allowance reaching £517m in 2016-17, up from £143m the year before. Paying over the tax-free limit into your pension results in an Annual Allowance Charge that most people just don’t see coming, and if you’re in a defined benefit pension, it’s not something that you can easily monitor on your payslips over the year.

“We’re not just talking a bill of a few hundred pounds, either – this time last year, I dealt with a client who had an unexpected tax bill of £13,500. Obviously, this was not something she had budgeted for in the run up to Christmas and trying to find the extra money caused her a great deal of stress. When we spoke to clients who have now found themselves affected by this new rule, a significant number were worried about being hit with an unexpected bill for adding to their pension and for some, it’s raised the question of whether they could actually afford to stay in the scheme at all. They weren’t the only ones to be worried, though, as figures show that in 2016 alone (the year the change was announced), 102,755 participants dropped out of their own company pension schemes. 

“In the last few weeks, some good news has been announced for the NHS’s high-income workers in that the NHS pension scheme has finally ‘caught up’ in its adoption of ‘Scheme Pays’. To put it simply, if a person’s Annual Allowance Charge is more than £2,000, they’re able to request the charge be paid out of their existing pension balance. This is in line with a number of other companies who were early adopters of the scheme and the news has no doubt comes as a great relief to many, especially with Christmas being just around the corner!”

If you have questions about the pension services offered by Parsonage Financial Planning, please call us on 0161 928 2706.

Levels of and reliefs from taxation may be subject to change and are dependent on your own particular circumstances. The Financial Conduct Authority does not regulate tax advice.

Here's a little more information about our team:

Q: Qualifications Include

A: My degree in modern languages included a module on economics and personal finance, and that's how I got into financial planning.

Since then, I've become dual qualified as both a Certified Financial Planner and a Chartered Financial Planner, including the specialist qualifications in Tax & Trusts (G10) and Pensions (AF3/G60).

The full list is:

AF3 - Pensions (CII) (I did that to totally update my pension knowledge, as I had done G60 in 1994.)
K10 - Retirement Options (CII)
K20 - Pensions Investment Options (CII)
G20 - Personal Investment Planning (CII)
Chartered Financial Planner (CII)
ER1 - Equity Release (CII)
HR1 - Home Reversion Plans (CII)
G10 - Taxation and Trusts (CII)
CFP - Certified Financial Planner Licence (IFP)
H15 - Supervision and Sales (CII) 

In November 2016 I added the STEP (Society of Trust and Estate Practicioners) Certificate for Financial Services.

Q: Do your clients have anything in common with each other?

A: They are all lovely and there are a few similarities in their aims that I've noticed. 

Many of my clients want to do more than just meet their own needs. They also see themselves as custodians of their money for the next generation or for other beneficiaries. 

In other cases, their aim is to manage their wealth efficiently during their lifetime, with the aim of spending it all… but minimising tax on the way there.

Q: What type of work do you enjoy most?

A: I do get a real sense of satisfaction from the work with those clients who engage me to manage the needs of two generations of the same time. That can be 'just' a long-term and balanced investment strategy or it can be trust planning and estate planning to avoid paying too much Inheritance Tax.

Q: Where would you be right now if you weren't at work?

A: In the Lakes

Q: In the film of your life, who would play you?

A: In my head, it's Uma Thurman, but I expect they would approach 'Nursey' from Blackadder II.

Q: Curry or Hot Pot?

A: Agh, too difficult. Curry.

Q: Sherbert or Chocolate?

A: Chocolate

Q: Lawn or Flowers?

A: Lawn

Q: What are you most likely to do whilst being 'on hold'?

A: Infuriate my colleagues by opening conversations then cutting off their reply when my call is answered.