Pensions 

Govt to announce further changes to NHS pensions

Govt to announce further changes to NHS pensions

Health secretary Matt Hancock is expected to set out further changes to the NHS pension scheme this week, following complaints that the government's recent consultation doesn’t go far enough.

The government announced today (August 5) that it will revisit the NHS pension scheme, while prime minister Boris Johnson confirmed a £1.8bn NHS cash injection to help improve patient care.

This includes money for 20 hospital upgrades and capital funding to upgrade outdated facilities and equipment.

Concerns about doctors’ pensions hit the headlines when it emerged doctors were refusing shifts to avoid high tax bills.

The government is currently consulting on how to fix the issue and plans to introduce a 50:50 option which would allow clinicians to "halve their pension contributions in exchange for halving the rate of pension growth". 

However, the British Medical Association (BMA) argued the 50:50 proposal would not remove the incentive for doctors to reduce their working hours, stating that only scrapping the tapered annual allowance will do this.

The tapered annual allowance was introduced in 2016 and gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer a tax charge on contributions and a lifetime allowance tax charge on their benefits.

The tapered annual allowance means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

In a  Sunday Times article yesterday (August 4), Mr Johnson said that the government is listening to doctors and will change the rules so that they no longer have to cut their hours to reduce their tax bill.

Mr Johnson said: “It cannot be right, for instance, that people are waiting so long to see their GP; and it cannot be right that so many GPs and consultants are leaving the service, or cutting their hours, for fear of whopping tax bills. 

“It is clear that something has gone badly wrong in the taxation of doctors’ pensions. So this government is listening. We are fixing it. We are changing the rules so that doctors no longer face a perverse incentive to reduce hours.”

The BMA said while it is positive that the government is beginning to recognise the problem, the real solution must be in overhauling the “damaging tax legislation” – including the annual allowance and tapered annual allowance – that leaves senior doctors facing large unexpected tax bills.

BMA council chair Dr Chaand Nagpaul said: “If the prime minister is serious about improving care and tackling waiting times he must give patients reassurance that senior hospital doctors and GPs will be able to continue to provide care, and not be forced out by absurd taxes on their pensions that mean all too often they are paying to go to work.

“The BMA has led the campaign on this issue, and while it is good that the prime minister appears to be beginning to recognise the scale of the problem, flexibility alone is not the solution – especially without employers’ full pension contributions being recycled back into doctors’ salaries.