Health and Social Care secretary Matt Hancock announced today (May 3) that the government plans to consult on proposals to offer senior clinicians a new pensions option, which will allow them to build their NHS pension more gradually over their career without facing large tax charges.
Plans to introduce a 50:50 option would allow clinicians to "halve their pension contributions in exchange for halving the rate of pension growth", the Cabinet Office and department of Health and Social Care stated.
Under current rules there is no flexibility on the rate at which a pension builds up, with the highest earning consultants contributing 14.5 per cent of their pensionable pay per month.
This means that many doctors have exceeded their pension savings allowances and faced huge tax bills.
Mr Hancock said: "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 reforms we are setting out today will give clinicians greater flexibility to manage their pensions, have more control over their future, and offer a deal that’s fair to doctors, taxpayers, and the patients they care for."
But the proposals have been met with criticism.
Doctors union the British Medical Association (BMA) stated the 50:50 proposal will not remove the incentive for doctors to reduce their working hours.
BMA chair of council, Dr Chaand Nagpaul, 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."
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.
Due to this many doctors decided to opt out of the NHS Pension Scheme, stopped doing overtime or retired early.
Government figures from July 2018 showed that the number of GPs who had taken early retirement had risen from 33 per cent to 62 per cent of all retirements since 2011/12.
Dr Nagpaul said: "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’."
Last week the BMA warned that self-employed doctors are facing an increase in their pension bills of up to £7,000 per year, after the government increased employer contributions to public sector schemes.
The issue is that while GP practices will receive additional funding from the government for the increase of the employer contribution rate from 14.3 to 20.6 per cent from April 2019, self-employed doctors aren’t employed by the NHS directly.
This means if they are part of the pension scheme they have to come up with the extra contributions.
Mr Nagpaul said: "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."
amy.austin@ft.com
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