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Govt wants full flexibility for NHS pensions to solve crisis

Sajid Javid
Chancellor Sajid Javid

Doctors should have full flexibility about the amount they put into pension pots so they are not penalised for working overtime, the government says.

It will shortly open a consultation with the proposal that would allow high-earning clinicians and doctors to treat more patients without losing financially.

This replaces the 50:50 proposal put forward for consultation just over two weeks ago (22 July) where members could reduce the amount of pension they build up alongside the amount paid.

Starting from next financial year, the new rules would allow senior clinicians to set the exact level of pension accrual at the start of each year.

For example, 30 per cent contributions for a 30 per cent accrual rate, or any other percentage in 10 per cent increments depending on their financial situation.

The government says this would give them room to take on additional work without breaching their annual allowance and facing tax charges.

Employers would then have the option to recycle their unused contribution back into the clinician’s salary.

The new proposal is meant to tackle an acute staffing crisis where senior doctors and clinicians are not doing overtime due to pension tax rules.

The British Medical Association surveyed 6,170 GPs and consultants to find out how their work patterns are changing due to the annual allowance and lifetime allowance.

It found 42 per cent of GPs have already reduced the number of hours spent caring for patients because of actual or potential pension taxation charges.

Alongside the proposals for full flexibility, HM Treasury will review how the tapered annual allowance supports the delivery of public services such as the NHS.

The government says the Treasury will continue to engage with the NHS, the BMA and other stakeholders as part of this process.

Chancellor Sajid Javid says: “This government is committed to ensuring that British people see a real difference in public services, including getting quicker GP appointments and a reduction in waiting times.

“Critical to that is introducing flexibility into the system so that our hospitals have the staff they need to deliver high-quality patient care, which is why we’ve listened to concerns and will be reviewing the operation of the tapered annual allowance. This will help to support the delivery of our vital public services.”

Responding to the announcement AJ Bell senior analyst Tom Selby says the government has got itself into a “real mess” over the pension tax taper.

He adds: “For months the Treasury has insisted the horrendously complicated taper was a central part of the system and here to stay.

“While today’s announcement from recently appointed chancellor Sajid Javid isn’t quite a U-turn, it represents a significant shift in position from his predecessor Philip Hammond.

“High-earning consultants and GPs are refusing extra shifts because of the impact the taper has on the tax they pay, placing significant strain on the UK’s already creaking health system.”

And he notes the taper applies to all savers, not just those in the public sector.

“It acts as a significant disincentive to long-term saving and creates a complex barrier to effective retirement communication. We know this complexity puts people off pension saving and it needs to be tackled head-on.”

AJ Bell suggests the government should “broaden its horizons” to consider the “potentially harmful consequences” of other pension tax measures.



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. This shows the standards this government has sunk to. Having a different pension system for doctors is totally inequitable. You must use the same rules for everybody.

    Between the government and HMRC they have totally mismanaged pensions over the years. They had no foresight as to what might happen and no will to redress the situation when problems became clear, other than the ridiculous fudge they are now proposing, for only select members of society.

    There certainly is a staffing crisis in the NHS that has been caused by this government and the previous coalition. There are a myriad of reasons for this and I won’t go into them all but, obviously, real wage cuts for staff, the abolition of nursing bursaries and general underfunding and poor working conditions. We’ve also lost thousands of nurses and midwives from European countries (the reason being obvious).

    The government needs to give pension funding a complete rethink but I doubt there is anybody in this government with enough brains to do it. Sajid Javid is a waste of space, as he’s shown in previous jobs.

  2. Interesting the other repercussions of this about turn.

    If, as indicated, the doctors will be allowed to opt out of the scheme AND receive the employer contribution in their paypacket, will ALL NHS staff not have to be offered this benefit? This will encourage employees to select short term wealth in exchange for longer term pension depletion? Not sure how this would affect the current budget, but likely to be a long term state saving.

    Like choosing to leave NHS and take a private pension in the 80s/90s. A mis-sale that the state benefitted from, but made the pension companies pay all the compensation.

  3. More pensions apartheid.

    Huge amounts of social unrest ahead.

    I don’t s’pose MPs care though do they? Even though they are robbing the poor to give to the rich.

  4. So the NHS wants a deal on pension tax charges! Don’t we all.

    If you give an inch they will take a mile. Give in on this tax charge and they will soon challenge all their taxation.

    It must be the same for everyone, if not every person effective will try to claim a deal, using the same reasons stated above.

    The same issues are faced by many businesses and individuals, why should the NHS be any different?

  5. Who will administer this?

    What will happen to the level of life cover the Dr has?

    What happens to the employer contribution?

  6. Why only doctors? The same rules need to be applied for all.

  7. Robert Handford 8th August 2019 at 12:21 pm

    A fair few senior docs who are in both practice and research are members of the Universities Superannuation Scheme (USS) instead of the NHSPS.
    The USS already allows members to select how much of their total earnings are ‘pensionable’, with an option to pay a small contribution on non-pensioned earnings to maintain health and death benefits on total earnings. It’s called the Voluntary Salary Cap (VSC) or ‘opting down’.
    For those who opt-out or opt-down, some universities will provide a salary enhancement equivalent to employer pension cost savings.
    However, they must have first taken advice and maybe the this will also be a requirement when the NHS proposals comes out.
    You can model all the moving parts of;
    -remaining fully in the scheme,
    -opting down (VSC in USS, or hopping in and out of NHSPS to artificially reduce pensionable earnings each tax year),
    -opting out fully now or in a future year
    to determine which scenario provides best lifetime value for money.
    (If you use commercial cashflow modelling software, you will need to manually adjust/fudge if they don’t have DB input and AA taper fully in their tax routine)
    For higher earnings who have no historic annual allowance left to carry forward and are already past their LTA, modelling tend to suggest modestly better value for money by opting-out or down. Where the employer pension costs are also redirected as increased salary, the margin increases hugely.
    So, there is already precedent for the proposals. Non-government pension schemes and employers could do the same at any time, as the USS did a few years ago. If the Gov extended to all public-sector schemes, making advice a condition (which is likely to cost a few hundred pounds, and advisers are usually very cautious over opt-out advice) would act as deterrent to the ‘spend today, forgot about tomorrow’ concerns of some commentators
    It does sound unfair if the changes aren’t for all but there is precedent here too. Way back, docs and dentists had a carve out of pension rules that allowed them to have PP & OPS simultaneously when others couldn’t, due to the unique structure of their earnings. (GP’s made profits and had notional pensionable salary). They were also subject to CARE accrual years before the 2015 changes to public sector pensions.
    The annual allowance taper is a nightmare though. The amount you can pay, is reduced in line with actual amount of pension input, which you only find out from the scheme months after the end of the tax year so very hard to do in year planning, unless you are confident enough to do provide the client with pension input estimates. How about no taper, and £30k annual allowance for all?

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