As part of their response to COVID-19, the government plans to temporarily suspend significant tax charges on pension income for recently retired public sector workers aged between 50 and 55 who are returning to work to assist in providing critical public services. 

The current rules provide that, where an individual with a protected pension age between 50 and 55 retires and takes benefits before they reach the age of 55, they lose that protected pension age if they are later re-employed by their former employer, unless specific exemption conditions are met.

Losing the protected pension age turns the pension income received into an unauthorised payment, taxable at up to 55%. Since most returning workers will be re-employed by their former employer, in many cases the NHS, to undertake similar work to what they were doing before they retired, they are unlikely to meet the conditions for exemption from these tax charges.

The proposed changes to the rules will reinstate the age protection for such workers, so removing the tax charge and will initially apply to pension payments made between 1 March and 1 June 2020. The changes were first introduced for doctors and nurses but are now to be extended to all public sector workers such as police, fire service and other uniformed service workers, who are returning to work specifically as a result of COVID-19.

Links

COVID-19: Government support tracker
This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.

Pensions: Unauthorised payment charges (subscriber)
What is a pensions unauthorised payment? When does a tax charge arise? Who pays the charge?

External Link

HM Treasury statement