NHS could pay doctors pension tax ahead of hectic winter
19 Nov 2019
Doctors have been promised their tax bills for higher rate pension relief could be covered by the NHS in efforts to get them working overtime shifts
19 Nov 2019
This comes after doctors have been refusing to work overtime due to the tax penalties they received on their pensions due to the £40,000 annual allowance limits.
The amount people can put into pensions tax free was reduced for all pension savers in 2010, when the £255,000 allowance was cut to £40,000 a year and drops still further for the highest earners.
This problem had originally arisen in 2016, because of a tapered annual allowance for pension contributions for individuals whose taxable yearly income exceeds £150,000. This meant that the £40,000 annual allowance is steadily reduced down to a base level of £10,000.
The changes generally affect those earning more than £110,000, around a third of senior doctors and GPs.
The latest proposal for the NHS to pay doctors’ pension tax relief, would mean that doctors were able to take money out of their pensions to pay the tax bills for next year.
Then before doctors retire the NHS will top up their pension, meaning the cost of the measure to the health service will be spread out over time while doctors will not be out of pocket.
This emergency plan would just apply to the 2019-20 tax year. But it cannot be finalised until the new government comes into power.
In August 2019 when the Department of Health and Social Care (DHSC) consulted on proposals to give full flexibility over the amount senior clinicians put into their pension pots.
It was suggested that consultants, surgeons, GPs and others at the high end of NHS salary scales could agree 30% contributions for a 30% accrual rate, or any other percentage in 10% increments depending on their financial situation.
The latest proposal would give them room to take on additional work without breaching their annual allowance and facing tax charges.
Dr Chaand Nagpaul, British Medical Association (BMA) council chair, said: ‘The BMA has been in active discussion with NHS England about what short-term options, including this interim measure, could be implemented to allow doctors to resume additional work over the coming winter period.
‘These proposals under discussion could, if properly implemented, provide the respite needed to enable significant numbers of doctors to increase the work they are doing, giving vital patient care at a time of unprecedented demand.
‘However, we don’t yet have important details about how the such a scheme will work; details that are crucial to the BMA and to the tens of thousands of doctors that we represent in order to provide the necessary reassurance that doctors can take on additional work without this resulting in any financial penalty.
‘We look forward to having those details in the very near future, and call on the next government to urgently scrap the annual allowance in defined benefit schemes such as the NHS, a solution proposed by their own advisory body, the Office for Tax Simplification.’
There has been a push to find a solution quickly as pressure is growing ahead of winter for the NHS. In September 2019 the NHS recorded 4.42m patients on the waiting list which is the highest number ever.
‘The scale of the NHS winter of misery for patients and overstretched workforce has forced emergency pensions bailout but questions need to be asked. Why did the government not act sooner when they have been warned for so long about the impact on patient care? Will NHS be fully reimbursed?’ said Lib Dem MP for Totnes, Sarah Wollaston on Twitter.
‘If the Treasury has promised to reimburse pensions then it is a change of policy during an election and a breach of purdah rules to spare government embarrassment for previous inaction, if not then what won’t be funded if NHS money is now being diverted to pensions?’