The Pensions Ombudsman has upheld a complaint against the NHS Business Services Authority and Primary Care Support England after they “negligently” failed to provide a GP with tax information and delayed the handling of his pension contributions.
Dr N had complained to the ombudsman that the tax charge applied to his pension commencement lump sum could have been avoided, or significantly reduced, if NHSBSA and PCSE had acted on his requests to update his pensionable pay figures before his retirement.
Both NHSBSA and PCSE have been instructed to repay the claimant £1,919.73 each towards the lifetime allowance charge that was incurred, as well as a further settlement to compensate for the distress caused.
It follows a series of cases of NHS Pension Scheme members facing costly tax charges, while staff have increasingly been opting out of the scheme.
I find that NHSBSA’s statement that Dr N had retained enhanced protection was incomplete and misleading
Anthony Arter, Pensions Ombudsman
Delay resulted in domino effect
In November 2016, Dr N emailed PCSE explaining that NHSBSA had not been updated with his correct pay. His actual earnings were £95,000, while NHSBSA was only aware of earnings of £28,000.
PCSE then confirmed receipt of the updated pay information but said that it needed to identify the money in NHS England’s bank account before it could be allocated to his record, adding that NHSBSA would not be updated until the entire year was reconciled, and Dr N’s 2016-17 self-assessment form was submitted.
In response, Dr N said: “As it is possible that I may exceed the LTA (I do hold enhanced protection, however), I do think that my 2016-17 contributions should be brought up to date with NHS pensions as soon as possible rather than waiting until August 2017 when the Type 2 medical practitioners assessment form 2016-17 appears on their website, thus avoiding problems with different tax years.”
In an email to NHSBSA, Dr N said that he was concerned that his superannuation contributions for the 2016-17 financial year have not been brought up to date, which was “obviously relevant in relation to the LTA”.
In January 2017, Dr N retired with a pension commencement lump sum of £225,303.18. The value of Dr N’s benefits for testing against the LTA, based on his estimated pensionable earnings until September 2016, exceeded the allowance, but he held enhanced protection against any LTA charges.
However, NHSBSA, after receiving a revised pensionable pay figure from PCSE, said in a letter that the PCLS was now worth £234,901,83 — some £9,589.65 higher than previously calculated.
A letter from NHSBSA in March 2018 stated that Dr N’s enhanced protection eliminated any LTA charge on the annual pension, but it did not increase the amount of PCLS that could be taken.
NHSBSA said that the additional PCLS was therefore an unauthorised payment and was liable for a tax charge of 40 per cent, worth £3,839.46.
After the case was raised with the Pensions Ombudsman, it concluded that while Dr N had incurred a tax liability, he should have been informed of the consequences in advance so that he could mitigate or minimise the payment. The situation was worsened by PCSE failing to update his records in good time.
Ombudsman Anthony Arter said: “NHSBSA had no duty to actively advise Dr N how to best access his pension.
“However, it did owe a duty of care to ensure that its answers to specific questions about the availability of enhanced protection and possible LTA charges, where it was clear he intended to rely on it, were accurate and complete.
“I find that NHSBSA’s statement that Dr N had retained enhanced protection was incomplete and misleading.”
PCSE and NHSBSA have been instructed to each pay Dr N £250 in respect of the “significant distress and inconvenience caused”.
NHS Pension Scheme woes
The conclusion from the ombudsman is the latest in a series of issues that have plagued the NHS Pension Scheme.
In May, it was revealed that nearly 40 per cent of the NHS staff who breached their annual allowance in 2018-19 turned to scheme pays to help them foot the bill, according to research from Quilter, as it warned of a legacy of allowance issues for many doctors.
Figures showed that in 2018-19 some 13,548 members exceeded the annual allowance, with 5,115 (38 per cent) electing for scheme pays to help them pay the bill.
This compared with 22,428 breaching the allowance in 2011-12, but only 776 (3.5 per cent) turning to scheme pays for help.
In June, Pensions Expert reported that the government was to amend regulations to the NHS Pension Scheme that has seen hundreds of employers, including GPs, hit with charges for staff members who are in the last three years before retirement, which could amount to hundreds of thousands of pounds.
GPs admin woes continue in new Capita pensions portal
The long-running saga of admin issues for doctors continues, as a new pensions and payments portal for GP practices, introduced in June, has shown a series of failings, including missing records and payments.
The pensions tax system has been adversely affecting doctors for some time, and although the Budget 2020 lifted the adjusted income and threshold income levels under the tapered annual allowance by £90,000 for the 2020-21 tax year, there is still a legacy of annual allowance issues for many doctors.
The tapered annual allowance gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and an LTA tax charge on their benefits.
The rules have forced senior clinicians and other high earning public sector workers to either leave their pension scheme, cut down on their working hours, or retire early to avoid punitive tax bills.
