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 is possible that it could be a useful option for some – particularly for those who are expecting significant increases in their annual salary and could hit the annual allowance threshold, or for those who do not want to contribute the standard amount into their pension pot so they have more money in their pocket each month.

It is also a useful alternative to opting out of the NHS pension scheme altogether.

The challenge for senior clinicians wanting to take advantage of the scheme will be understanding what their likely pensionable earnings will be in a year.

It is likely that clinicians will have to decide what contribution option to make based on what their projected earnings will be at the start of the year, but this is not always easy.

One way to do this would be to look at your average earnings over the past few years to try to build a reasonable prediction of your likely income.

This might not work, however, for those planning to increase the work they do, or for partners who know a significant change in their business is likely, such as a fellow partner retiring and not being replaced.           

The fact remains that the tapered allowance – which affects about a third of NHS consultants and partners in GP practices  – will result in more higher earners contributing towards the public purse by reducing the amount they can save into their pensions tax-free.

The BMA had previously asserted that the 50:50 option should just be a short-term measure while wider reform of the pension taxation system was undertaken and has said the new proposal are a “step forward” by government.

Will the proposals mitigate this tax taper?

Some senior clinicians have already started calling on the government to make more wide-sweeping reforms to the taxation of pensions while simultaneously changing the annual and lifetime allowance rules.

It is clear that the now-scrapped proposal — the 50:50 option — did not go far enough to address the issues that are now having an impact on NHS performance and patient care.

But the new proposals look to be a bigger step in the right direction. The BMA reports that “it is good to see the government finally sitting up and taking notice”.

Here at Wesleyan, we welcome the decision to shelve the recent consultation – in our view it was inadequate and only papered over the cracks.

But we still believe that the government should scrap the tapered annual allowance at the earliest opportunity.

It is overly complex and leads many doctors to sleepwalk into paying huge tax bills.


Questions appear on the last page of this article.