Is NHS Pension Scheme taxed at source....?

Tom_Bradbury

....and if so, can it be paid gross?

Reason for asking is I am looking at retiring abroad where they charge less income tax on earnings, so would get more bang for my buck if my pension was paid gross and I paid tax in the local country I was living. I have read somewhere that all Government pension schemes are taxed at source and that can't be changed, but didn't know if that included the NHS Pension Scheme or if 'Government pension schemes' included only those payable to, for example, Civil Servants. 

Brie

Well my pension is taxed at source so assume the NHS one would be treated the same.  

You might want to consider transferring the pension overseas via a legitimate QROPS scheme so that the pension is being dealt with in the country where you are planning to live.  Do this with caution though as there's a lot of sharks out there. 

Flugelhorn

the NHSBSA have to pay it out according to the tax coding they are given by HMRC - (who I think will treat it as income earned here and hence tax it ) 

reckon NHS pension is  a "government scheme"

Pat38493

NHS pensions cannot be transferred out according to another thread here a few months ago?

Beyond that, I would wonder how this would work if you are not resident in the UK for tax purposes.  It might be that you would pay tax in the UK but you could then claim it back and offset it against the tax in the country where you are located.  It might also be very dependent on which country you are moving to as it might need to be a country that has a tax treaty with the UK for these type of things.

molerat

https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad

If you’re not a UK resident, you don’t usually pay UK tax on your pension. But you might have to pay tax in the country you live in. There are a few exceptions - for example, UK civil service pensions will always be taxed in the UK.

Other guidance seems to state "UK Government and Local Authority" pensions.
https://www.litrg.org.uk/tax-guides/pensioners/what-happens-if-i-retire-abroad#toc-how-is-my-uk-pension-income-taxed-

It might also be worth looking at this

https://www.gov.uk/government/collections/tax-treaties

xylophone

https://www.nhsbsa.nhs.uk/sites/default/files/2021-08/UK Transfer Out Guide and application pack-20210311-(V13).pdf

From 6 April 2015 transfers to schemes that provide ‘flexible’ benefits (including money purchase benefits) are not permitted.

https://www.blacktowerfm.com/news/transferring-your-private-uk-pension/#:~:text=In order to be eligible,QROPS or any other scheme.

 Benefits from Unfunded Public Sector Schemes (Police, Teachers, NHS) cannot be transferred to a QROPS ...

Marcon

xylophone said:

https://www.blacktowerfm.com/news/transferring-your-private-uk-pension/#:~:text=In order to be eligible,QROPS or any other scheme.

 Benefits from Unfunded Public Sector Schemes (Police, Teachers, NHS) cannot be transferred to a QROPS ...

From the NHS pension website https://www.nhsbsa.nhs.uk/member-hub/leaving-or-taking-break-scheme a minute ago: 

To transfer to an overseas pension scheme, complete the form in the overseas transfer out guide and application pack

xylophone

From the NHS pension website 

Thank you for this.

I have read through the form which appears to have a number of caveats.

I am wondering whether to count as "qualifying" the overseas pension scheme would need to be one which did not offer flexible benefits or access before UK minimum pension age.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/moving-your-uk-pension-overseas

I find it interesting that Blacktower (which seems to specialise in transfers to overseas schemes) is so specific about transfers of unfunded Public Service Schemes  to QROPS not being permitted.

I am also struck by this 2017 article

https://bdhsterling.com/qrops-transfers-on-the-rise/

The other change which took place in 2015 was the removal of the right to transfer a public sector scheme fund. This led to a surge in the final year of availability. Until then, members of unfunded public sector pension schemes could transfer into QROPS schemes.

and

https://bdhsterling.com/which-pension-funds-can-i-not-transfer-into-a-qrops/

There are a number of UK pension funds that are not eligible for transfer.

You cannot transfer your UK State Pension into a QROPS. Nor can you make a pension transfer of any scheme which has previously been used to purchase an annuity, or if you are already drawing your pension from a final salary guaranteed payment. You are also not allowed to transfer any schemes run by the NHS, the teachers’ pension scheme, the civil service, armed forces, police or firefighters.

And in 2022 (transfer of pension to Australian "super"

Before thinking about transferring, it’s worth finding out at outset whether you can actually transfer all the pension funds you’ve accrued. Not all UK pensions can be transferred to a super. These include:

• Government-backed defined benefit (DB) schemes, such as the NHS pension scheme
• Any company pension scheme in the PPF (Pension Protection Fund)
• A company scheme from which you’re already drawing a pension
• Any annuities you’ve already purchased with a life insurance company.

You can’t transfer your UK State Pension, although this can still be paid to you even if you’re living in Australia. A key point to note, however, is that it will not increase each year.

Perhaps  both companies have misunderstood the rules or there are so few overseas pensions schemes which are eligible for "Qualifying" status  in respect of such transfers that they feel the blanket statement is justified?

xylophone

This has piqued my interest - I found this

https://www.iexpats.com/hmrc-qrops-list-february-1-2023/

Taking Australia as an example, there appear to be a number of QROPS and yet there is the definitive statement from BDH.

Perhaps a ROPS may be Q but does not accept transfers from UK unfunded PS Schemes?

Or perhaps only a QROPS which is itself a DB Scheme will accept any form of DB transfer?

https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/can-i-transfer-my-uk-pension-to-australia

The following types of UK pension arrangements can be transferred to an Australian QROPS:

• An occupational pension scheme
• A defined benefit scheme
• A defined contribution scheme
• A Small Self-Administered Scheme (SSAS)

You’re not allowed to transfer:

• UK state pension
• Unfunded civil service pensions, which include teachers, fire fighters, NHS workers, police and armed forces
  
  
  One assumes that for CS pensions one should read "unfunded public service pensions".
  
  

ItalyGuy

I am a resident in Italy and receive an NHS Pension which is taxed at source in the UK.  I wish to continue to do this as the tax rates in Italy are less favourable.  My understanding is that my pension must be taxed only in the UK under the dual taxation agreement Article 19 (2)(a) as it is a Government Pension.  The only exception is if the pension is paid by CAPITA, which in my case it is not.  Is my understanding correct?