Almost 4,000 NHS pension members including GPs and potentially practice nurses will miss out on more than £31m of tax compensation, according to new data.
The problem has arisen because of confusing guidance and pension administrative processes, says, Medifintech, a specialist provider of NHS pension analysis, which is part of wealth management company, Quilter.
A Freedom of Information request submitted to the NHS Business Services Authority (NHSBSA) by Medifintech found that 1,628 GPs have been affected – and are set to lose an average of £4,452.
Meanwhile, 125 nurses are affected, a cohort that could include general practice nurses (GPN) although no specific numbers are available for GPNs. They are set to lose an average of £11,963 to £13,139 (see box below).
The issue stems from the 2019/20 Pensions Annual Allowance Charge Compensation Scheme (PAACCS), which was set up to prevent NHS staff having to pay pension tax charges where the growth of their pension benefits breached the annual allowance.
Under a special arrangement for the 2019/20 tax year, clinicians facing a tax charge could have it paid by the NHS pension scheme (via Scheme Pays) rather than have to cover it from their own pocket – and also be fully compensated for the deduction on their pension income when they retire.
The measure allowed clinicians to take on more shifts or sessions without worrying about the extra tax charge.
However, the ‘poorly communicated’ and ‘confusing’ admin rules around this have posed problems, explained Quilter. It said that when applying for the compensation scheme, staff had to complete and return a scheme pays election as well as a separate PAACCS application, a dual-step process many were unaware of.
And while members registered for the scheme pays elections, many didn’t file the necessary additional paperwork required before the deadline, which passed in 2022.
In addition, NHS England’s PAACCS webpage still lacks updated guidance following the McCloud remedy, the company said.
Quilter is now calling on the Government and NHS England to take action to ‘prevent future failings’. It wants to see the PAACCS application deadline abolished and retrospective applications be allowed at retirement. Furthermore, it is asking for NHS Pensions to automatically check with members at retirement if there is a 2019/20 Scheme Pays application and no corresponding PAACCS application. In addition, it is calling for official guidance to be updated and include the McCloud remedy into the PAACCS policy framework.
Graham Crossley, NHS pension specialist at Quilter, said this was a clear case of a policy with good intentions but flawed execution.
‘Hardworking NHS staff deserve a pension system that supports them, not one that penalises them due to administrative failure’, he added.
‘Thousands of NHS professionals, including frontline doctors, GPs, and nurses, took on extra work despite the tax risks – trusting they would be protected from financial penalties. Instead, they are being denied relief due to bureaucratic red tape, leaving them with avoidable tax bills in a period of unprecedented healthcare strain.’
An NHSBSA spokesperson told our sister publication Pulse: ‘Not all members who have made a 2019/20 Scheme Pays application will be eligible for the Pension Annual Allowance Compensation Scheme (PAACCS).
‘Information about PAACCS, including eligibility, is available on the NHS England website. We’re working with NHS England to update information so that members affected by the Public Service Pensions Remedy (McCloud) understand whether they’re eligible for PAACCS and how to apply.
‘Updates will be made to both the NHS England website and the NHSBSA website and we’ll update Employers so they can support their NHS Pension Scheme members with applications for PAACCS.’
FOI data showing numbers of NHS staff that have misses pension tax compensation
| Employment type | Affected members | Missed tax compensation | Average |
| GP | 1,628 | £7,247,748.97 | £4,451.93 |
| Hospital doctor | 1,401 | £11,640,788.39 | £8,308.91 |
| Officer | 545 | £8,533,164.83 | £15,657.18 |
| General dental practitioner | 187 | £2,382,638.19 | £12,741.38 |
| Non-Special Class nurse | 87 | £1,040,805.93 | £11,963.29 |
| Special Class nurse | 38 | £499,292.30 | £13,139.27 |
| Hospital dentist | 2 | £10,790.05 | £5,395.03 |
| Total | 3,888 | £31,355,228.66 | £8,064.62 |
Source: Quilter, NHS Business Services Authority
