Members of the NHS pension scheme affected by the tapered annual allowance could get a higher pension if they work part-time, the British Medical Association has warned.
Union officials have written once again to the Chancellor of the Exchequer urging HM Treasury to meet with them to find a solution for the problem.
The BMA - which represents 125,000 hospital consultants and family doctors – has warned Philip Hammond that doctors will reduce their NHS working hours "unless there is tangible reform to the NHS pension scheme".
Concern about doctors' pensions has increased significantly since the introduction of the tapered annual allowance in 2016.
This gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.
The tapered annual allowance means that for every £2 of income above £150,000 a year, £1 of annual allowance will be lost.
It emerged in December that the number of members leaving the NHS Pension Scheme was five times higher than that seen by other public pension funds.
In the letter, seen by FTAdviser, the BMA officials noted that to avoid the annual allowance charges, “consultants must limit their income, and in most cases, this means stopping doing regular overtime in the form of additional programmed activities”.
They also stressed that as a result of these charges, it may also make financial sense for consultants to consider working part-time.
This is because most consultants cannot afford to pay these bills from their net take-home pay, since they are such substantial sums, and have no choice but to pay these tax bills from their pension using the ‘scheme pays’ option – which allows them to pay tax on any annual allowance breaches through their pension.
“Consequently, as a result of paying this tax and the interest rate charged on this loan, they may paradoxically receive a significantly higher pension by working part-time once the scheme pays loan is deducted,” the BMA stated.
Dr Rob Harwood, chairman of the BMA consultant committee, said that unless action was taken, the only option for consultants is to reduce the amount of time they work for the NHS, which will be detrimental to “patients and to the country’s health service – exactly what the BMA has been trying to avoid".
He added: “The BMA has always sought constructive dialogue with the Government and NHS employers, and has taken every opportunity of making clear the grave threat faced by the health service to those who have both the power and responsibility to effect change.
“The government’s window of opportunity is closing fast, and we urge the Chancellor a final time to make reform of pensions taxation an immediate priority.
“Action is needed now, before doctors are compelled, by these punitive rules, to reduce their working hours or quit the health service. Doctors are facing the very real prospect of effectively working for no pay and that is untenable.”