Health

NHS pension shake-up unveiled to tackle 'tax trap' staffing crisis


Ministers have unveiled a major overhaul of the NHS pension scheme to try to stop doctors cutting their hours in order to avoid falling into a “tax trap” that means they face bills for as much as £100,000.

Matt Hancock, the health secretary, said the changes meant “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 point in NHS history.”

The government is keen to find a solution to the problem, which has led to thousands of operations being cancelled in recent months because so many surgeons and anaesthetists have stopped doing additional shifts for fear their extra earnings could incur higher tax bills and has also meant cancer scans have piled up unread for weeks.

The Department of Health and Social Care (DHSC) estimated the current rules are perversely incentivising as many as one in three family doctors and consultants to turn down extra work in case it increases their pension pot in any year by so much that it leads to a large bill.

Boris Johnson pledged in July during the Conservative leadership race to fix the problem as evidence mounted that the situation was also leading to some GPs and hospital consultants retiring earlier. Soon after becoming prime minister he wrote: “It cannot be right that so many GPs and consultants are leaving the service or cutting their hours, for fear of whopping tax bills.”

The DHSC has launched a consultation on three planned key “new flexibilities for GPs, senior nurses and consultants”. If implemented, such staff would be able to choose at the start of the tax year how much their pension pot should grow by and adjust their contributions accordingly.

Senior staff would also be able to “fine-tune their pension growth towards the end of the tax year” once they know how much work they have done in those 12 months. In addition, if high-earners receive a big pay rise, they would be able to phase in over several years how much of that goes into their pension.

This is the second set of plans ministers have brought forward to tackle an issue that is disrupting care and exacerbating NHS understaffing. However, groups representing doctors gave the plans only a lukewarm response and warned that reform needed to go much further.

“It’s a useful contribution to the work that is needed to reform pension taxation laws but, while the options within this consultation will help alleviate the issues, they will not resolve it,” said Dr Phil De Warren-Penny, deputy co-chair of the consultants committee at the British Medical Association.

He urged ministers to scrap the tapered annual allowance, annual allowance and lifetime allowances introduced in 2016. Doctors said those measures are the main reason they have been clobbered with big bills.

Dr John West of the Hospital Consultants and Specialists Association was also sceptical. The plans would make already complicated pension arrangements even more complex.

“The government is essentially gambling with patient care. These proposals will be certain to fuel a bonanza for financial advisers but it is less clear whether they will help address the current unravelling of services,” he said.

“There is a strong likelihood that doctors will go for the easy route of ensuring their pay stays below the tax thresholds that trigger huge tax bills.”



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