Pension Changes: What A Difference A Week Makes
- Details
- Published: Wednesday, 30 November 2022 21:10
- Written by Peter Ingle
- Hits: 1678
In the competition for a dentist’s attention, pension provision is up against the kaleidoscope of day-to-day practice, maintaining clinical and ethical knowledge, keeping on the right side of regulators, and paying this month’s bills. The complexity of the NHS pension schemes and the intricacies of private pension plans, do not make them any easier to grasp.
In the competition for a dentist’s attention, pension provision is up against the kaleidoscope of day-to-day practice, maintaining clinical and ethical knowledge, keeping on the right side of regulators, and paying this month’s bills. The complexity of the NHS pension schemes and the intricacies of private pension plans, do not make them any easier to grasp.
Despite this, a recent change is likely to be relevant to many clinicians. Pensions have been a very appealing source of tax revenue to successive governments, but for a change there has been a concession that will be of some benefit to contributors.
In an interview with GDPUK, Heidi Marshall, Healthcare Partner at Dodd & Co Chartered Accountants, explained that the key change is a modest shift in the date that NHS Pensions apply their dynamisation to calculate the annual growth in the value of pensions. The revaluation which was usually done annually on March 31st will now be done about a week later, moving it into the following tax year.
Heidi, recently elected Chair of NASDAL, the National Association of Specialist Dental Accountants and Lawyers, explained that the spike in inflation had produced an unusually high growth in the value of NHS pension pots over the year. There is an annual allowance by HMRC after which this growth is taxed at an individual’s highest marginal rate. The crux of the problem is that the annual allowance is calculated using the previous year’s Consumer Price Index (CPI), while the NHS use the current year’s figures when calculating the pension value.
In normal years with steady levels of inflation this has not been a significant issue. The problem this year was that the growth figure would be boosted by a period with high inflation, but the allowance based upon one with low inflation. The respective CPI figures were 3.1% for the year ending September 2021, and 10.1% for September 2022. As result there would be an extra tax bill for many. The solution has been to move the valuation date, making it a week later. This shifts it into the next financial year and so both the allowance and growth figures will reflect a similar level of inflation.
This change should not affect the dynamisation process which accounts for a proportion of the growth of the NHS pension pots. This particular pension change was, according to Heidi, “definitely positive news.” She went on to add that although these changes are likely, they have not officially been announced by the government yet.
In not such good news, Heidi reminded GDPUK that the lowering of the 45% tax threshold in the recent Autumn Statement, would mean that more dentists would now be paying tax on some of their income at the highest rate.
Principal of Minford Specialist Chartered Accountants and NASDAL Media Officer Johnny Minford commented, “It is more crucial than ever to review your NHS pension and be aware of your annual allowance position in order to plan and, where appropriate, elect for Scheme Pays before the deadline.
Michael Copeland, dental regional manager at Wesleyan Financial Services, a specialist financial services company, said, “Assuming the Government sticks to its longstanding formula, pension pots will then be boosted by 11.6%; equal to September’s inflation rate of 10.1%, plus an extra 1.5%.” It meant that any charges due to exceeding the annual allowance, “will be based on contributions made by the member and the employer, not as a result of inflation pushing up the value of funds.”
He also advised that there were implications for those considering retiring in the coming months, saying, “any dentist who is in the NHS pension scheme and anticipates retiring between 31st March and the delayed date in early April, may wish to consider delaying until after this later date, or they will miss out on their pension revaluation for that year.”
Date change
He also advised that there were implications for those considering retiring in the coming months, saying, “any dentist who is in the NHS pension scheme and anticipates retiring between 31st March and the delayed date in early April, may wish to consider delaying until after this later date, or they will miss out on their pension revaluation for that year.”Just contacted them to enquire re changing my 16/3 date.
We have updated Compass with a retirement date of 16/3/2023, we cannot keep amending these as there is a lot of calculations regarding closure of contract and NPE that go on in the background, any changes would mean asking IT to take all the records out.
Computer says no!!
Just contacted them to enquire re changing my 16/3 date.
We have updated Compass with a retirement date of 16/3/2023, we cannot keep amending these as there is a lot of calculations regarding closure of contract and NPE that go on in the background, any changes would mean asking IT to take all the records out.
Computer says no!!
You need to be logged in to leave comments.
Report