Pension tax – local options for affected staff

Ready reckoner

Employers can adopt a flexible reward offer to support staff impacted by pension tax issues and to help protect the delivery of clinical services.

By working collaboratively with employees and trade union representatives, employers can implement appropriate local solutions to support staff who are affected by pension tax. These local measures would be complementary or in addition to national contracts and the pension scheme regulations.

The local options available for employers to consider are outlined on the below pages. These include options for individuals wishing to remain in the scheme as well as those that decide to opt out.

Employers should take appropriate advice and have assurance that such agreements are lawful and based on strong justifications. Any local agreements, including those that have previously been put in place, should be reviewed regularly to ensure that they remain relevant and in the best interests of both employers and employees.

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Paying unused employer contributions as additional salary

Employers have the option to pay unused employer contributions to staff that have opted out of the NHS Pension Scheme due to annual or lifetime allowance concerns.

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Managing pensionable pay

Employers have some flexibility in determining certain elements of pay as being non-pensionable to help staff to limit their pension growth.

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Opting out of the scheme for part of the year

Sometimes referred to as the hokey-cokey, staff can opt out of the NHS Pension Scheme for part of the year to reduce pension growth.

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Time off in lieu (TOIL) arrangements

TOIL could be offered to staff instead of pay to reduce pensionable income.

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Use of multiple contracts

Multiple employment contracts could be created to allow staff to opt out of the NHS Pension Scheme for one or more of their employments.

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