Are you affected by changes to pensions and other benefits intended to help the NHS and its staff fight the Covid-19 pandemic? If so, make sure you understand what these changes mean to you
Recently retired doctors returning to work to help combat the Covid-19 pandemic are amongst several groups affected by new pension measures and related provisions introduced amid the crisis.
If you’re in one of these groups, understanding the changes is important, particularly since many of them effectively give you new rights and benefits.
Pensions help for doctors returning to work
In the case of returning doctors, the Government’s action plan for dealing with the pandemic, published on 3 March, included plans to increase the size of the health and social care workforce; an important element of the plans was the removal of barriers that might prevent recently-retired NHS staff and social care workers from coming back to work.
Emergency legislation therefore took effect on 25 March, temporarily suspending some of the regulations that normally apply to the NHS Pension Scheme. The aim was to enable skilled and experienced staff who had recently retired to return to work without adversely affecting their pension benefits; the measures also enabled retired staff who had already returned to work to increase their commitments without having to worry about their pension entitlements.
In particular, the legislation suspended the “16-hour rule”, which normally prevents doctors who return to work after 24 hours of drawing NHS pension benefits from working more than 16 hours per week over the following calendar month. It also suspended “abatement” rules in the 2008 and 2015 sections of the NHS Pension Scheme as well as for MHO’s in the 1995 section; ordinarily, these rules stipulate, broadly, that a member’s NHS pension is reduced pound for pound if when added to their post retirement earnings the total exceeds their pensionable earnings in the NHS prior to their retirement. More details of these changes are available online.
New death benefits
Another area of change concerns death benefits. Matt Hancock, the Health Secretary, has announced that in England, the families of staff who die from Covid-19 after working on the frontline will receive a £60,000 payment. Mr Hancock has said the payment will be made whether or not staff are members of the NHS Pension Scheme, so families of members of the scheme are entitled to receive the £60,000 on top of their standard death-in service benefits from NHS Pensions.
Welsh health minister Vaughan Gething has committed the Government to providing the same benefits in Wales, while Northern Ireland’s devolved administration has promised a similar scheme, though detail had not been made public at the time of writing.
In Scotland, meanwhile, Health Secretary Jeane Freeman has confirmed all families of frontline NHS staff who die as a result of Covid-19 will receive financial support. She is promising a total lump sum payment worth twice the staff member’s annual earnings, plus continued entitlements for survivors. The benefit will be available immediately and can also be backdated. The majority of NHS workers are already eligible for this through their NHS Pension Scheme membership, but the Health Secretary wants to ensure that all NHS staff who provide frontline services will be covered for the duration of this crisis. More details from the British Medical Association are available here.
Inheritance tax exemptions
The exemption of the families of emergency service workers, including members of the NHS, from the usual inheritance tax provisions in the event they die from Covid-19 is another important concession. It is worth pointing out that we are still awaiting full clarification from the Government as to which circumstances this can be claimed in.
Importantly, however, this exemption will not be applied automatically; rather, families will need to claim it. Families need to take professional legal advice as to whether they qualify for this exemption rather than risk being hit with an unnecessary tax bill. The exemption is likely to benefit older and more senior members of staff such as higher-earning senior doctors the most, as they have typically built up more assets over time. It could also provide relief for a number of the older frontline workers who have returned to the NHS to help the fight against Covid-19. Inheritance Tax is generally payable on death at a rate of 40% on estates valued at more than the tax-free amount (Nil Rate Band) currently £325,000. This tax-free amount can increase to £500,000 if the Residence Nil Rate Band is added (if you leave your main residence to your direct descendants). For married couples or civil partners, any unused Nil Rate Band or Residence Nil Rate Band can be used by the survivor on the second death, giving a total maximum tax-free amount of £1million.
The principle of this exemption has been part of UK law for some time, having originally been introduced for families of the members of the armed services whose death was caused or hastened by an injury suffered while on active service. The exemption was extended in 2014 to cover emergency services workers responding to emergencies, such as paramedics.
This further extension to a much broader NHS population reflects a desire to recognise the sacrifices made by so many health care workers during the Covid-19 pandemic.
Scheme Pays extension
One final Covid-19 change worth mentioning is an extension of the Scheme Pays application deadline. This is the facility for NHS staff who have a tax bill to pay in relation to their annual allowance for pension savings; in certain circumstances, they are entitled to ask the NHS Pension Scheme to settle this bill on their behalf, with the cost met from future benefit entitlements.
Typically, Scheme Pays applications must be made by the end of the July following the end of January deadline for filing tax returns – so 31 July 2020 in the case of applications for Scheme Pays related to the 2018-19 tax year. This year, however, the deadline has been extended three months to 31 October (and this will be reviewed at the end of July).
Bear in mind, however, that this extension is only available to applications under the voluntary section of the Scheme Pays rules; the deadline remains 31 July for mandatory Scheme Pays applications. If in any doubt, check to be sure.
Content correct at time of writing and is intended for general information only and should not be construed as advice.