Doctors and advisers have criticised the government's new plans for the NHS Pension Scheme as they warned of a pension 'postcode lottery'.
In a consultation out today (September 11) the department of Health and Social Care proposed to allow defined benefit scheme members to choose a personalised pension growth level at the start of each tax year.
Members will then be given the option to top up their pension pots when they are clearer on total earnings for tax purposes, or phase in a large increase in pensionable pay.
This was a step further from the 50:50 split the government had initially proposed in July.
However, if a clinician chooses a lower level of accrual, and therefore pays less in contributions, the employer will also pay less.
There will be an option to recycle the unused employer contributions under certain circumstances which will be set out by the government.
But the government stressed that "decisions on paying unused employer contributions will remain a matter for individual employers to take”.
FTAdviser reported last month that some NHS trusts have already implemented a contribution recycling scheme, which allows the trust to pay affected staff the equivalent of their employer pension contribution as additional salary.
Matt Hancock, Health and Social Care secretary, said: “I love the NHS – and our new plan means every senior clinician will be able to carry out life-saving work for patients safe in the knowledge they have more control over their pension, their future and their retirement than at any other point in NHS history.
“Today we’re taking a decisive step in fixing this issue for good so patients can feel the impact in GP surgeries and hospitals across England and we are already helping hospitals ease the immediate burden with new advice on action which can be taken now.
“To make sure we get this right, however, it is vital we learn from the experiences of our dedicated frontline staff, so I urge them to have their say.”
Dr Tony Goldstone, a consultant radiologist who has been campaigning for the government to scrap the tapered annual allowance, has already criticised the proposals.
In a tweet he said any option that is up to employers to decide “will remain a postcode lottery for doctors. It will fail."
Ian Macvie, pension & retirement technical manager at Wesleyan, said: “We acknowledge that by allowing higher earners to choose their own rate of pension accrual and contributions the proposals go some way to alleviating the worst aspects of the tapered annual allowance.
"However, we have two major concerns: firstly, what is already an absurdly complicated pensions tax structure will be made even more complex.
"Secondly, that unused employer contributions are not guaranteed to be added back into staff pay – this is at individual employer’s discretion. So, by opting for reduced pension accrual and contributions staff would effectively be voting for a poorer remuneration package.”
Dr Phil De Warren-Penny, deputy co-chair of the British Medical Association consultants committee, said the union was encouraged by the consultation.
However, to succeed NHS employers need to do their part and recycle all of the employer contributions, he noted.
He said: “If they don’t it’s still an effective pay cut for doctors for doing extra shifts. The real heart of the problem is the tapered annual allowance which must be removed along with the annual allowance and lifetime allowance.
“Only when these are removed can doctors return to working extra shifts to help remove waiting list backlogs and support colleagues where there are rota gaps, without fear of receiving huge tax bills.”
The department of Health and Social Care stated the proposals would “mean GPs and other senior clinicians have freedom to individually control how much their pension pot grows, allowing them to maximise the amount they can save without facing significant pension tax bills having breached limits on tax relief”.
The government recognised that a third of doctors may be incentivised to not take on extra shifts on top of their contracted hours because of how the NHS Pension Scheme interacts with the wider pension tax rules.
In August it stated the Treasury would be reviewing the impact of the tapered annual allowance after doctors have been campaigning to scrap it for months.
Introduced in 2016, the tapered annual allowance 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 taper means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.
Today's consultation stated: "The government is listening to concerns about how the operation of the tapered annual allowance affects the delivery of public services.
"The Chancellor has announced that the Treasury will review how the tapered annual allowance operates in order to support the delivery of public services."
maria.espadinha@ft.com
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