Third of pension annual allowance breaches are NHS workers

Analysis of HMRC data has shown that at least 34 per cent of all people who exceeded the Annual Allowance (AA) in 2019/2020 were members of the NHS pension scheme.

Recently released data shows that 42,350 taxpayers reported pension contributions exceeding their AA through Self-Assessment. The total value of contributions reported as exceeding the AA was £949 million in tax year 2019/20 which has increased from £819 million in 2018/19.

According to a FOI request to the NHS Business Services Authority by Quilter, 14,242 NHS pension scheme members used the NHS scheme pays facility in respect of a 2019/20 annual allowance liability. This figure includes those subject to tapered annual allowance.

The figures also show that of the 15,583 members, who exceeded the standard annual allowance through their NHS pension scheme, 10,776 have not used the scheme pays facility. Scheme pays allows savers to settle AA tax charges through their pension scheme without needing to find cash upfront. However, some of those 10,776 staff will have carry forward available meaning they can carry forward any unused allowances from the previous three tax years to boost the amount they can put into their pension and therefore not breach the allowance.

Graham Crossley, NHS pension specialist adviser at Quilter: “These figures illustrate how badly medical professionals are targeted by Annual Allowance tax rules compared to other professions. The fact that we know that NHS scheme members represent at least 34 per cent of all people that breached the annual allowance is bad enough, but in reality that figure could be closing in on 40 per cent to 50 per cent of the total.

“The NHS has played a critical role for the nation over the past two years and these figures truly highlight why there needs to be swift changes to these unfair rules, or you risk doctors leaving the NHS in their droves.”