In response to concerns that changes to pension taxation due to reductions in the tapered annual allowance has resulted in highly paid NHS medial staff cutting their hours or retiring early, the government is to consult on way to make pensions more flexible for senior clinicians delivering frontline care, reports Pat Sweet
Worries about doctors' pensions have been growing since the introduction of the tapered annual allowance in 2016. This gradually reduces the allowance for those with an income of more than £150,000, meaning top consultants are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits. The current lifetime allowance for total pension savings is £1,055,000 for tax purposes. It is important to note that the annual allowance also has an impact for those earning (threshold or taxable) income of £110,000. The £150,000 limit is for "adjusted income" including defined benefit growth.
The British Medical Association (BMA) has warned that the annual allowance cap created an incentive for GPs and other senior medical staff to either reduce the hours they worked for the NHS or quit the NHS altogether.
An independent review of the GP partnership model found 57% of GPs who retired in 2018 to 2019 took early retirement, a total of 610.
In December last year insurer Royal London warned the NHS faced an ‘opt-out pension epidemic’ after data it received via a freedom of information request showed the number of members leaving the NHS pension scheme is five times higher than that recorded by other public pension funds.
The government says its proposals, outlined in the NHS’s first ever people plan, would allow top earning medical staff to build their NHS pension more gradually over their career by making steadier contributions towards their pension, without facing regular, significant tax charges.
It would mean clinicians can freely take on additional shifts to reduce waiting lists, fill rota gaps or take on further supervisory responsibilities, without worrying about breaching the cap.
The Department for Health and Social Care is proposing introducing a 50:50 option, which would allow clinicians to halve their pension contributions in exchange for halving the rate of pension growth.
Matt Hancock, health and social care secretary, said: ‘Each and every senior consultant, nurse or GP is crucial to the future of our NHS, yet we are losing too many of our most experienced people early because of frustrations over pensions.
‘We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.’
The BMA said it welcomed the government’s agreement to review NHS pension taxation, which it described as ‘a step in the right direction’, but warned that the 50:50 option alone was not a sufficient response.
Dr Chaand Nagpaul, BMA chair of council, said: ‘ ‘We have modelled the proposed 50:50 scheme and it is clear that, by itself, this proposal will not remove the disincentive for doctors to reduce their working hours. It needs to be part of wider reform.
‘Given the complexities of the NHS pension scheme and the fact that individual circumstances vary, it is essential that any flexibility offers far more than simply paying half of the employee’s contribution in order for half the accrual of pension.
‘There needs to be the ability to recycle the employer’s pension contribution on the percentage of pay that is no longer pensionable. This is commonplace in other sectors with the Chancellor describing such payments as “regular”.
‘In addition given the unintended consequences that have arisen as a result of separate changes to the NHS pension scheme and the introduction of the tapered annual allowance, it is essential that these options are no more than a short term mitigation whilst the much needed reform of the pensions taxation system is undertaken.’
The consultation on NHS pension treatment is due for publication shortly.
Report by Pat Sweet