Defined Benefit  

NHS proposes partial pensions for doctors

NHS proposes partial pensions for doctors

The British Medical Association (BMA) and NHS England are proposing the option of a partial pension for general practitioners (GPs) in order to help reduce the number of opt-outs at the scheme.

In the 'GP contract agreement England 2019/20', which sets a framework for the next five years, the doctors’ union and the public body revealed they had asked the government to create such a facility for the NHS Pension Scheme.

The solution of a partial pension – which already exists in the Local Government Pension Scheme – would allow GPs to halve the rate at which their pension builds up, and in return pay half the rate of contributions.

The BMA said the annual allowance cap created an incentive for GPs to either cut their time commitment to the NHS or quit the NHS pension scheme altogether.

Concerns about doctors' pensions increased significantly 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 they were more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

It emerged in December that the number of members leaving the NHS Pension Scheme is five times higher than that recorded by other public pension funds.

Sir Steve Webb, former pensions minister and director of policy at Royal London, said a partial pension was an attractive idea, not just for doctors but for all NHS staff affected by this problem. 

He said: "The best reason for doing this is not to help a relatively small number of high earning GPs and consultants, but rather to tackle the ‘epidemic’ of opting out we are seeing amongst younger NHS staff on modest wages.

"For that group, the option of a half pension for half contributions would be much better than opting out altogether.

"For high earners, although they may be hitting annual allowance limits, many will still be better off by staying in the NHS pension scheme if opting out means foregoing a large employer contribution."

Andrea Sproates, head of Chase de Vere Medical, agreed the proposal was a positive step that could help doctors with their financial planning.

She said: "While we would like to see more fundamental changes to pension tax charges, the opportunity to reduce contributions and pension growth by 50 per cent is likely to be welcomed by GPs.

"[These doctors] in many instances, feel they have no option other than to opt out of the NHS Pension Scheme due to the cost of contributions and prospect of facing both annual and lifetime allowance tax charges."

Jonathan Halberda, senior financial consultant at Wesleyan, classified the proposal as "a major step forward for GPs".

He said: "As part of the changes, GPs will still be able to retain most of the benefits of the NHS Pension Scheme, including death in service and ill-health retirement cover, but the cap means they will be able to get closer to the annual allowance threshold without incurring additional taxes.