Pensions  

Government considers tempering the taper

Government considers tempering the taper

Few could have anticipated that one of the biggest potential threats to the National Health Service would have its roots in pensions legislation.

But on August 7, the Treasury and the Department of Health and Social Care announced they would consult on rules concerning the NHS pension scheme, after a campaign was started by the medical profession to scrap the highly controversial tapered annual allowance.

The effect of the TPA on doctors has become particularly pressing in recent months. In early August, the British Medical Association reported that thousands of GPs and hospital consultants – across England, Wales and Northern Ireland – were slashing their working hours in an attempt to avoid being penalised by the allowance.

Dr Richard Vautrey, chair of the BMA GP committee, said the situation had reached the point where some doctors were feeling forced to leave their jobs.

“With patient lists growing and the numbers of GPs falling, swift and decisive action is needed from the government to end this shambolic situation and to limit the damage that a punitive pensions taxation system is inflicting on doctors, their patients and across the NHS as a whole.”

While the number of NHS staff exceeding the annual allowance averages 17,000 a year (see Table 1), it is the taper that has caused the issue. Statistics compiled by the BMA do not make for pleasant reading. In a survey of more than 6,000 doctors, 42 per cent of GPs said they have already reduced working hours because of recent pension tax changes, with an additional 34 per cent stating they plan to take the same action.

Table 1: NHS staff and the annual allowance

Year

Members exceeding the annual allowance

Scheme pays elections

Elections as per cent

2013-14

21,021

1,353

6.4

2014-15

21,396

347

1.6

2015-16

8,031

768

9.6

2016-17

20,945

1,126

5.4

2017-18

12,655

3,869

30.6

Source: Quilter FOI and NHS. Copyright: Money Management

The situation in hospitals paints an equally troublesome picture: the number of hospital consultants that said they had either cut back on hours, or were planning to, was 30 and 40 per cent respectively.

Taper cut

But this was only the start of the controversy. Intermediaries would have been familiar with the TPA’s potential complications as soon as it came into force on April 6 2016. But momentum around the need for its reform truly kicked off earlier this year when the issues that doctors have been facing hit the national press.

Newly appointed prime minister Boris Johnson vowed to tackle the problem, initial proposals to remedy the situation having not been warmly received. One of the immediate suggestions put forward by the DHSC was a 50:50 arrangement, whereby doctors could halve pension contributions to lessen the risk of breaching the allowance.

Jon Greer, head of retirement policy at Quilter, described this as the equivalent of a “Band-Aid being used when there is a heart attack”.

Mr Greer suggested the BMA statistics should provide the necessary impetus to prompt policymakers into taking swift action, and claimed the removal of the TPA was the only sensible outcome.

“At one point there was also a proposal to have a special tax arrangement for schemes, but the former chief secretary to the Treasury, Liz Truss, has already acknowledged in parliament that creating different rules in the tax system for certain sectors is not a practical option as it risks discrepancies and tax arbitrage,” he said.