November 16, 2020

The tool cuts through the complexity of the Annual Allowance to provide a simple traffic light risk indicator for NHS staff, says Dale Walmsley.

Commissioned by NHS Employers, First Actuarial has developed an NHS Pension Scheme Annual Allowance and tax ready reckoner. As independent advisers to the Scheme Advisory Board of the NHS Pension Scheme, we were uniquely positioned to develop the tool. The ready reckoner is designed to provide an Annual Allowance risk indicator – in the form of red, amber and green ‘traffic lights’ – along with estimates of the cost of membership and pension growth for the 2020/21 tax year.

The Annual Allowance – Cutting through the complexity

The NHS Pension Scheme is a key part of the total reward package for the NHS workforce and provides great value for money for much of its membership. However, our research into the impact of pensions tax in the NHS showed that the Annual Allowance was a material concern for some members. Pensions can be quite difficult to understand at the best of times and the Annual Allowance brings in even more complexity. 

For this reason, we were delighted to work with NHS Employers to design and build a ready reckoner to raise awareness of this complex and sensitive issue. We designed and developed the ready reckoner with user experience as a priority. To make the tool simple and easy for NHS staff to use, First Actuarial’s development team ran a series of feedback sessions on the look and feel of the tool. 

NHS Employers provides guidance for staff for each required input, and help is also integrated into the tool. The ready reckoner can be used on any computer or mobile device.

A key output of the ready reckoner is a simple risk indicator of the user’s Annual Allowance position, which works as a traffic light system:

For some members, the tool will indicate the need for further investigation and possibly professional advice.

NHS Employers is keen to emphasise what the tool does and does not provide. The ready reckoner gives members an Annual Allowance risk indicator rather than a definitive statement of the member’s tax liability. The Annual Allowance, like all pension calculations, is complex, involving a huge number of variables, not least other sources of income such as investments and rental properties.

NHS Employers is proactively encouraging managers and HR professionals to use the tool, with guides, webinars and videos available for employers. For NHS employees who have concerns about the Annual Allowance, the tool provides a valuable risk indicator, and can help consider next steps such as discussing potential tax liability with an accountant or an Independent Financial Adviser. And that’s exactly what First Actuarial designed it to do.

As demonstrated by the development of our ready reckoner, First Actuarial staff are experts on the Annual Allowance and its interaction with the NHS Pension Scheme. We work with employers in the NHS to help employees understand how they are affected and what action they can take. This support is often a two-step process: a group workshop to explain the issues in simple terms, followed by individual guidance session for anyone who needs further help.

Any questions or comments about this article?

Get in touch with the author, Dale Walmsley.

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