High earning doctors should be able to reduce their pension contributions to avoid being penalised by the tapered annual allowance, the government says.
A consultation published by the Department of Health and Social Care suggests a ‘50/50’ proposal where members could reduce the amount of pension they build up alongside the amount paid.
Health professionals in the NHS have complained about being hit by higher allowance charges and the British Medical Association has written to the government repeatedly about the issue.
In May former pensions minister Steve Webb called for the Treasury to abolish the tapered annual allowance as quickly as possible to tackle the NHS pensions crisis.
Subsequently chancellor Philip Hammond ruled out scrapping the tapered annual allowance and argued it is “necessary to deliver a fair system and protect the public finances.”
This consultation arises out of this context and aims to put the controversy over NHS pensions to rest.
Responding to the consultation Aegon pensions director Steven Cameron says: “It’s important to resolve this issue so medical professionals don’t feel constrained from taking on extra work.
“The government is consulting on allowing individuals to choose in advance to take only a proportion of their pension entitlement or to wait till the end of the year before deciding how much additional pension to ‘buy’, both designed to avoid suffering a tax penalty.
“While well-intentioned, expecting medical professionals to make informed choices here is layering further complex decisions on top of an already complex set of pensions tax rules.
“Medical professionals are accustomed to referring complex medical issues to specialists, and here, there is a very strong case for obtaining financial advice from a pensions professional.”
Quilter head of retirement Jon Greer described the 50/50 rule as a “sticking plaster” which does not properly diagnose the root of the pension problem.