Will rising inflation affect my NHS pension?
The potential impact of rising inflation on your NHS pension.
Your NHS Pension benefits are driven exclusively by your pensionable earnings and your years of service. The contributions that are paid into the scheme today are simply used to pay out benefits to those members who are already retired from the profession and in receipt of their pension benefits. To safeguard your own pension it is very important that your pensionable earnings are recorded accurately.
However, the Pension Input Amounts for your NHS Pension are calculated each year using the Consumer Price Index, a variant of Inflation. The significant rise in inflation this year will affect Pension Input Amounts in April 2023, and this is likely to lead to members of the NHS Pension Scheme potentially exceeding the Annual Allowance. This is the maximum amount that you can contribute into a pension in a tax year and receive the tax breaks associated with pensions. If you exceed this limit you will need to pay the Annual Allowance tax charge to HMRC.
Whilst this is largely out of any individual member’s control, depending on your personal circumstances, you may find mechanisms for relieving this overfunding. For example, by claiming ‘carry forward’ to utilise unclaimed annual allowances from previous years, or using the ‘scheme pays’ rules, which allow annual allowance charges to be settled via a reduction in pension benefits.
Our advisors will be happy to hear from you if you need some support with navigating the impact of overfunding on your NHS pension (without obligation).
PROTECTING YOUR INTERESTS
If you require financial advice to establish how the McCloud Resolution affects your Lifetime Allowance (LTA), Annual Allowance (AA) and related interests, or you have any other questions and queries about your NHS Pension or other financial issues then please contact our friendly team of specialist medical accountants for a no-obligation consultation.
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