How clinical excellence awards reforms affect your NHS pension
The NHS’s Local Clinical Excellence Awards scheme in England has changed from 1st April 2018, but how will your NHS pension rights be affected?
Reforms of the NHS’s Clinical Excellence Awards (CEA) scheme have proved controversial, with agreement only reached earlier this year after six years of negotiations. But now the future of the scheme is more certain, doctors need to think about how the changes will affect their finances – including their pensions.
As in the past, the NHS clinical excellence awards will continue to recognise and reward consultants judged to be making the most valuable contributions to safe and high-quality patient care, those who are supporting the continuous improvement of NHS services, and those who are identifying new and innovative ways to improve quality of care.
The awards will also continue to fall into two categories: local awards made by trusts and national awards from the Advisory Committee on Clinical Excellence Awards (ACCEA). The former is awarded on a points basis, from one point to nine points, while the latter are either Bronze, Silver, Gold or Platinum awards.
However, as the NHS seeks to reduce the cost of the awards, several changes are now coming into effect:
• Existing awards will remain in place, but these will be subject to a nationally agreed process of renewal from April 2021.
• Trusts will continue to run annual awards rounds but any new points added to an existing award will be time-limited to between one and three years, and will not count as pensionable pay.
• All new local awards made in England from April 2018 onwards will be non- pensionable and non-consolidated
• This excludes any awards that are backdated to be implemented before 1 April 2018
• Any new national awards currently remain unchanged and pensionable.
These reforms have several important implications for doctors planning their finances for the years ahead.
Most obviously, there is no guarantee doctors currently receiving a local award can count on this income remaining in place indefinitely, given plans for the 2021 review. The amount paid under each award is not changing, but the process agreed for reviews from 2021 onwards may result in a doctor’s income being affected.
Similarly, any extra income received from increased local awards will effectively be temporary, given the time limits on these awards.
NHS Pension posers
As for pensions, doctors will need to consider issues related both to their tax bills today and their future entitlements.
First, bear in mind that any award you receive will continue to count towards your “threshold income” and your “adjusted income”. These are the thresholds that apply when calculating whether you are entitled to the full annual allowance of £40,000 worth of pension input (the increase in the value of your benefits). Broadly speaking, doctors with a threshold income above £110,000* and an adjusted income above £150,000** get a reduced allowance, tapered on a sliding scale calculated according to their income. It’s therefore possible that an award could mean doctors face a tax liability – the annual allowance charge – even though any new local awards are no longer pensionable and therefore produce no additional pension benefits on retirement.
Second, the fact that local awards will increasingly be non-pensionable means you may need to reassess the benefits you can expect to receive in retirement
You may also want to consider alternative provision or savings.
If in doubt, consider taking independent financial advice on your NHS pension options – the changes to the local CEA scheme could potentially have a significant impact on your plans, both today and in retirement.
This article represents our understanding of law and HM Revenue & Customs practice as at 19.12.18.
* Threshold income is taxable income from all sources less any gross private pension contributions via relief at source. For NHS Pension Scheme members taxable income equates to gross income less any pension contributions deducted at source via a net pay arrangement.
**Adjusted income is your taxable income plus all pension contributions made by an individual deducted via a net pay arrangement plus pension contributions made by an employer. For defined benefit arrangements, like the NHS, the employer contribution is determined by the increase in your pension benefits, after allowing for inflation, less your own contributions.
Please note that this article is for information only and does not represent personalised advice.
Content correct at time of writing and is intended for general information only and should not be construed as advice.