Tax  

Doctors' union dismisses offer of pension tax review

Doctors' union dismisses offer of pension tax review

A Conservative manifesto pledge to review the tapered annual allowance and the impact it has on doctors in the NHS Pension Scheme has been dismissed by the British Medical Association.

The Conservative manifesto, published on November 24, promised to fix the tapered annual allowance dilemma that is affecting doctors’ pensions, but the party stopped short of promising to scrap the taper altogether.

Instead it said it will hold an urgent review to solve the “taper problem” within the first 30 days of winning the election and would work with the British Medical Association and Academy of Medical Royal Colleges to carry out this work.

But the BMA has dismissed the Conservative’s offer of a review saying that decisive action was needed instead.

BMA council chairman Chaand Nagpaul said: “One of the critical problems stopping many doctors from taking on extra work treating patients and resulting in some leaving the health service altogether, is the huge tax charges they are paying on their pension growth. 

“These bills can exceed the money they earn, meaning they are losing out by going to work. 

“A commitment to a review is not new and not what is needed. We need action. 

“The next chancellor must immediately scrap the damaging annual allowance and tapered annual allowance in defined benefit pension schemes to ensure that no doctor is penalised for going above and beyond for their patients.”

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.

Due to this rule, many doctors have been forced to cut their hours, leave the pension scheme or retire early to avoid being caught out by significant tax bills.

Last week, the government attempted to temporarily solve the taper issue by pledging to cover the tax bills of members of the NHS Pension Scheme who are in frontline clinical roles in England.

But these measures only cover the 2019/20 financial year and currently only apply to clinicians.

The BMA has also shown disdain at these proposals stating the temporary fix highlighted the urgency for pension taxation reform.

Mr Nagpaul said: “A year ago, the government and the NHS buried their heads in the sand over the crisis that was coming, a crisis that’s now here, caused by punitive pension taxation charges. 

“The BMA has lobbied tirelessly to bring about reform of pension taxation; we remain strong in our view that the definitive solution is for a new government to scrap the annual allowance in defined benefit pension schemes as soon as possible. 

"This temporary one year scheme announced by NHS England and NHS Improvement is a clear and unequivocal sign of the depth of the crisis the NHS faces this winter, and provides further evidence that pension taxation reform is needed as a matter of urgency.”