Wesleyan, the specialist financial services mutual for doctors, has called on the government to take immediate action to implement its new proposed changes to NHS pension rules.
As part of the government's Plan for Patients, health secretary Dr Thérèse Coffey said she would “change” elements of the NHS pension scheme to help retain doctors, nurses and senior staff, as well as increase capacity.
This included amending the revaluation date in the NHS pension scheme to reduce the risk of staff facing annual allowance charges as a result of rapidly rising inflation.
However, Wesleyan said action needed to be taken sooner rather than later as research by the firm revealed nearly a third (30 per cent) of medical professionals said they had, or planned to, reduce their hours to minimise the risk of receiving an annual allowance or lifetime allowance tax charge.
A fifth (20 per cent) had or planned to leave the NHS pension scheme permanently in a bid to avoid tax charges, while a further fifth (19 per cent) had or planned to strategically leave and re-join the scheme in an attempt to limit their pension growth.
Wesleyan said the research highlighted the impact “punitive pension taxation” is having on the NHS workforce.
Alec Collie, head of medical at the Wesleyan Group, said: “Pension tax has been a problem for our health service for far too long.
“We currently have a perverse situation where, by continuing to go above and beyond for their patients, some of our most senior and experienced clinicians risk receiving what can be eye-watering tax bills – bills so large that we know of cases where doctors have actually had to take on significant debts to pay them.”
Collie said it is good to see the government acknowledge the importance of fixing pension problems in supporting the NHS workforce, however as these results show, “time is of the essence”.
“We’ve seen government intention,” he added. “We now need to see action, with a clear timetable for these changes.”
The research by Wesleyan revealed that more than a quarter (29 per cent) of medical professionals surveyed – including senior hospital consultants and GPs – plan to retire within the coming year.
Of those retiring earlier than planned, one in six (14 per cent) said it was because they had hit their lifetime allowance on pension savings.
As well as addressing inflation-linking issues in pensions, the government also committed to making NHS trusts offer ‘pension recycling’.
Collie said while this can help some doctors manage their risk of receiving expensive pension tax bills, it does not – in its current form – help GPs.
“It also requires doctors to opt out of the NHS pension scheme – something we always urge caution around,” he said.
“Leaving the NHS pension scheme could mean doctors end up with a diminished pension pot on retirement, and lose valuable benefits that the NHS pension scheme brings – such as the ‘death in service’ gratuity, which pays a lump sum to their families and dependents if they pass away."
Retire and return
The research by Wesleyan, conducted between August 18 and September 5, surveyed and received responses from 293 medical professionals.
It found that two-fifths (41 per cent) of doctors planned to continue working in some form after they started taking their pension benefits, with many continuing to do NHS work.
Of those continuing to work, two-fifths (43 per cent) will work in the health service, with a further one in five (19 per cent) doing a mix of private and NHS roles.
Collie added: “Changing the ‘retire and return’ rules could make it easier for retired clinicians to return to work without suffering pension penalties.
“But we’ll need to see more details, again sooner rather than later, on how the plans will work to know if it will be effective in practice.”
The government’s Plan for Patients will introduce new retirement flexibilities in pension rules – including the option for staff to take partial retirement to draw on their pension while continuing to build their retirement benefits, and working more flexibly.
It also pledged to extend temporary easing of ‘retire and return’ rules – which otherwise reduce or suspend pension benefits of retired or partially retired staff who return to work – until 31 March 2025.
A Department of Health and Social Care spokesperson said: “The NHS Pension Scheme provides generous retirement benefits for hardworking staff, and our plan for patients sets out new pension flexibilities to encourage our most experienced clinicians to stay in or return to practice.
“Pension tax should not impact take-home pay, as the scheme pays facility allows clinicians to meet the value of a tax charge at retirement without needing to find funds upfront.
“We are making practical changes to address pension issues – including reducing the risk of annual tax allowance charges as a result of inflation by moving the scheme revaluation date, and encouraging NHS trusts to offer staff who face significant pension tax charges cash payments instead.”
sonia.rach@ft.com
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