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NHS pension reforms should inspire wider rethink experts say

The government should consider broader pension tax reforms on the back of its proposal to allow NHS doctors more flexibility about how they save, experts say.

Earlier today HM Treasury announced it will review how the tapered annual allowance supports the delivery of public services such as the NHS.

The government also said 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 in July where members could reduce the amount of pension they build up alongside the amount paid.

Experts say the suggested reforms to help solve a staffing crisis at the NHS are long overdue but more radical action should be considered.

They point out it is not only high paid doctors and consultants who receive hefty tax bills due to breaching the annual and lifetime allowance.

Quilter pensions expert Ian Browne says: “The pensions sector has long been complaining about the punitive and unpredictable nature of the annual allowance taper, but it has taken a crisis in the NHS for the government to finally consider how to address it.

“Today’s solution giving doctors greater control over pension contributions is an improvement on the 50:50 proposal under May’s government. However a bespoke solution for doctors ignores large swathes of high earning public sector workers who provide critical services everyday such as judges, teachers and transport workers.

“The chancellor has committed to reviewing the salary threshold at which the taper impacts people, but the government should go much further.”

Former pensions minister and Royal London director of policy Steve Webb adds: “After months of pretending that there wasn’t a problem, and months more of suggesting that a tweak to the NHS pension scheme was all that was needed, this U-turn is welcome. In particular, the suggestion of a review of the tapered annual allowance is long overdue.”

AJ Bell senior analyst Tom Selby notes the taper applies to all savers, not just those in the public sector and is a disincentive to long-term saving.

Other aspects of the system such as the money purchase annual allowance and lifetime allowance hinder long-term saving as well.

He adds: “Rather than just reviewing how the taper interacts with public services and the NHS, the government should broaden its horizons to consider the potentially harmful consequences of other pension tax measures.

“A review of retirement saving incentives aimed at removing unnecessary complexity and encouraging more people to save for their future is long overdue and could create a system people can genuinely engage with.”

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  1. Well what’s good for the Doctor goose must also be OK for other high earners. Get rid of the funding restrictions.

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