Defined Benefit  

Doctors set out plan to solve pension woes

Doctors set out plan to solve pension woes

The British Medical Association is asking the government to introduce "immediate mitigations" to stop doctors reducing their working hours to avoid large tax bills.

The BMA - which represents 125,000 hospital consultants and family doctors – is proposing to introduce a policy to allow doctors to recycle their employer’s pension contributions while it called for a UK-wide scheme for NHS staff to retain or purchase death-in-service benefits.

Dr Rob Harwood, chairman of the BMA consultants’ committee, told FTAdviser the union would also like to enter discussions to review the pay scales of the 2003 consultant contracts in England and Wales and the 2004 consultant contracts in Scotland and Northern Ireland to "smooth the incremental pay rises that trigger disproportionately large tax bills".

In addition, the BMA wishes to meet with HM Treasury to address the problems with the annual allowance and in particular the tapered annual allowance, as "the way in which these are calculated is inherently unfair", he said.

Dr Harwood added: "Unless such actions are taken, doctors will be left with no option but to reduce their working hours to avoid large tax bills, so exacerbating an already acute workforce crisis and seriously jeopardising the sustainability of the NHS."

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.

The Chancellor of the Exchequer Philip Hammond has said he is looking to bring more flexibility into the NHS Pension Scheme to solve this issue.

In a Treasury committee hearing in April, Mr Hammond revealed he was in discussions with the Health secretary to find a solution for doctors affected by the tapered annual allowance.

But he noted that the government would have to look at the cost to the public purse of introducing such flexibility, and that it couldn't treat "NHS staff differently from everybody else".

BMA’s Dr Harwood said the union is encouraged that the Chancellor is now aware of the "harsh impact" that current tax and pensions rules are having on doctors, but it hopes that he will now translate words into urgent action to resolve the issue.

He said: "We are not calling for special treatment for doctors, only that they are treated fairly. As the Health secretary is aware, the unintended consequences of changes to the pension taxation rules, coupled with changes to the NHS pension scheme results in unfair and punitive charges being levied on doctors.