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

In the absence of the easement, the 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 easement to the rules reinstated the age protection for such workers, so removing the tax charge and applied to re-employment between 1 March and 1 November 2020. The changes were first introduced for doctors and nurses but were later extended to all public sector workers such as police, fire service and other uniformed service workers, who returned to work specifically as a result of COVID-19.

Useful guides on this topic

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 

Pension schemes newsletter 125: October 2020 (confirming the easement would expire on 1 November 2020)


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