New changes to doctors pensions

  • Describe the challenges posed by the tapered annual allowance for doctors
  • Describe how the new flexibility proposed could work
  • Identify the ways to go forward for NHS professionals

It has therefore brought increasing numbers of high earners in the NHS within the scope of pension tax.

The BMA warned that the annual allowance cap created an incentive for senior GPs and consultants to either reduce the hours they worked for the NHS or quit the NHS altogether.

It even highlighted the fact that even GPs in their 30s were being advised by accountants to reduce their working hours to avoid the tax charges.

And these are the issues that the government hopes this consultation will tackle head-on.

The Health and Social Care Secretary stated: "NHS doctors do extraordinary, life-saving work every day, and they should not have to worry about the tax impacts if they choose to go the extra mile by taking on additional work to help patients."

The new consultation is due to be launched this summer and alongside the plans for full pension contribution flexibility it will also review the tapered annual allowance. Stakeholders including the BMA are expected to be brought into the discussions about the proposals.

How the flexible contribution option would work

At the heart of the new consultation is the Department for Health and Social Care's proposal to introduce flexible pension contributions.

The increased flexibility replaces the 50:50 proposal previously consulted on.

It would allow senior NHS practitioners to adjust their regular pension contributions in exchange for changing the rate of pension growth.

The Department of Health and Social Care said this would mean someone could choose to make 30 per cent contributions for a 30 per cent accrual rate, “or any other percentage in 10 per cent increments depending on their financial situation”.

If applied, the change would mean that a typical NHS pension pot would build more gradually over a consultant’s or GP’s working life and could mean savers avoid tax charges from exceeding their annual allowance.

This is the amount that senior clinicians can save into their pension tax free each year, which is currently set at £40,000.

Consequently, the proposals apply expressly to anyone who has, or is likely to contribute, more than £40,000 to their pension pot in a year, and/or those who have an adjusted income of more than £150,000.

The change to the consultation comes following discussions between the wider workforce and health secretary Matt Hancock, who had pledged to seek views on other ideas to make NHS pensions work better.

Other ideas put forward by the profession to address the issue include removing the current annual limits for practitioners who choose to top-up their pension by purchasing “additional pension” later in the tax year, to maximise any remaining headroom in their annual allowance.

The key issues

While the 50:50 scheme is not a new concept – it has been used in the Local Government Pension Scheme for several years – the increased degrees of flexibility are.


Questions appear on the last page of this article.