As reported by The Times, the NHS is pleading with doctors to postpone their retirement as the healthcare system faces a significant backlog in cases, partly resulting from the Covid-19 pandemic.
NHS England has written to hospital leaders asking them to entice retired doctors back to work and to encourage those due to retire to postpone that decision and continue working.
As part of this campaign, NHSEI have been keen to stress the alleged pension benefits of working longer, but it is this claim with which the BMA has taken issue.
On its website, NHSEI argues that it can still be beneficial to continue working even after reaching the lifetime allowance limit, as it is still possible to build pension income after accounting for the higher pensions tax that would be applied.
It provides an infographic purporting to show that someone who retires at aged 60 without breaching the LTA limit would have an annual pension income of £46,630 and a lump sum at retirement of £139,891.
Meanwhile, someone retiring at 61 and breaching the LTA limit would take home £48,306 — a figure of £1,676 more than retiring at 60 — and £146,762 as a lump sum, an increase of £6,871.
This prompted the BMA to issue a press release and write a letter to NHSEI expressing its “serious concerns” about what it called “inaccurate and misleading” information, arguing that — far from being better off — people retiring a year later and breaching the LTA limit could suffer significant losses.
Doctors would be worse off, not better off
In its letter, sent to leaders at NHSEI and the NHS Pension Scheme Advisory Board, BMA pensions committee chair Dr Vishal Sharma and deputy co-chairs Drs Tony Goldstone and Krishan Aggarwal expressed their dismay that NHSEI continues to publish these allegedly inaccurate claims, which are now being cited by government ministers as though they are true.
In a written question in parliament on April 25, Conservative MP Dr Dan Poulter asked health secretary Sajid Javid “what assessment he has made of the impact on NHS staffing and retention of the (a) £40,000 annual pension threshold for both pension contributions, and (b) annual increase in total pension value”.
In response, health minister Edward Argar said: “It is not possible to isolate the impact of a single factor such as the annual allowance on staff choosing to reduce their working hours or take early retirement. The annual increase in pension value for the vast majority of NHS staff is expected to be within the £40,000 annual allowance for tax-free pension saving and is unlikely to impact retention.
“However, the highest earners within the NHS will find that the generosity of the NHS Pension Scheme means they exceed their annual allowance. Where this occurs, the scheme pays facility is a proportionate means to meet the cost of an annual allowance charge from the value of pension benefits.”
Argar added: “NHSEI are delivering a retention programme focused on employers making flexible employment offers to staff, engaging higher earners on pension tax issues, and demonstrating the benefit of delaying retirement.”
In their letter, Sharma, Goldstone and Aggarwal said that this claim — based on information NHSEI had previously assured them would be removed from its website — was “fundamentally untrue”, arguing that, based on the BMA’s own pensions modelling, the example consultant used for NHSEI’s calculation would in fact be nearly £100,000 worse off over a typical 30-year retirement if they delayed retiring to aged 61.
“This misleading example is incorrect as it compares a pension received at age 61 (ie, a year later) that is based on pay that has been uplifted by a 2 per cent uplift with the value of the pension calculated at age of 60 but has failed to uprate this value with inflation to ensure a fair comparison,” they explained.
“This error is compounded by the current rates of inflation, which is expected to be in the order of 8 per cent this year, and the level of pay award suggested by the [Department of Health and Social Care in their submission to the [doctors and dentists review body] of 2 per cent.
“The example also fails to take into account the fact that, as there are no late retirement factors in the 1995 NHS pension scheme, the value of the pension that this consultant would have received if they delayed retirement by one year to the age of 61 is lost.”
They continued, arguing that the overall impact would be that the example consultant’s pension would be £1,810 lower a year, not £1,676 higher as NHSEI claims.
“When you take into account that they would likely, based on life expectancy, expect to enjoy a 30-year retirement and receive no late retirement factors as a result of staying within the scheme, they would in effect take a £99,140 cumulative loss over the course of their retirement simply by delaying their retirement for one extra year,” they said.
The BMA has been raising this complaint since 2021 and has now launched an interactive tool allowing members to see the “correct values” for the example consultant used by NHSEI, as well as their own situation.
“We will continue to raise these issues on behalf of members, and we formally request that this inaccurate information is removed immediately and this false narrative that NHS staff are better off financially by delaying retirement is not propagated any further,” Sharma, Goldstone and Aggarwal said.
“Indeed, these very same errors apply not just to the doctor example but the example of a nurse. Instead of focusing solely on the “education of members”, which in the case of many senior doctors will simply demonstrate the need for them to consider reducing their hours or taking early retirement, it is essential that NHSEI focus on actual solutions and mitigations that will address this problem.”
As for those solutions, they called on NHSEI to mandate trusts to introduce “recycling policies” to enable those impacted by pensions taxation “to access the full value of the employers’ pension contributions”.
They also asked NHSEI and the Scheme Advisory Board to support the BMA’s call for the introduction of late retirement factors in the 1995 scheme, “with the option of partial retirement and pensionable re-employment to be made available”.
A new tax-unregistered NHS scheme?
Finally, they said the BMA would push for the introduction of a new tax-unregistered scheme, citing the one introduced by the government to tackle recruitment and retention issues in the judiciary.
The Ministry of Justice launched a consultation into the proposed new scheme in July 2021, and announced it would proceed with its creation in December. The fact that the new Judicial Pension Scheme 2022 would be tax-unregistered means that benefits accrued in it would not count towards the LTA or annual allowance limits.
Sharma, Goldstone and Aggarwal said: “This would be a long-term solution to this problem and will remove any artificial limits on the amount of work and other higher earners in the NHS can do.”
The BMA itself said: “The pandemic has laid bare the fact that we do not have enough doctors and, to ensure that we can not only overcome the huge pressures we now face but to ensure we are better equipped to deal with future pandemics, the government must commit to appropriately increasing the size of the workforce.
“The forthcoming government-commissioned workforce strategy must lay out a clear plan to achieve this, including regular assessments and projections of future needs. Rather than try to simply put pressure on the exhausted medical teams we have to do more.”
NHSEI declined to comment on the grounds that it only implements policies set by the DHSC and HM Treasury.
The DHSC has been approached for comment.
Benjamin Mercer is a senior reporter at FTAdviser's sister publication Pensions Expert
