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NHSLatest NewsIndustrial action / strikesPensionsTax

Consultation launched to remedy NHS pension tax crisis

by Adam McCulloch 22 Jul 2019
by Adam McCulloch 22 Jul 2019 Shutterstock
Shutterstock

Senior NHS employees are to be consulted over whether NHS pensions should be altered to allow GPs and clinicians to take on extra work without having to pay higher tax bills.

The proposal, announced by heath secretary Matt Hancock, is designed to prevent clinicians looking to reduced their workloads and reject additional work to slow down the rise of their NHS pension pots, to which an annual allowance of £40,000 applies (an absolute limit of £1.1m applies to each pot).

The move comes after reports of cancelled operations and unread cancer scans began to emerge after clinicians began working to rule. According to the Guardian there have cases of some NHS staff remortgaging their homes to pay pension tax bills of as much as £80,000.

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Full-time doctors are usually contracted to undertake 10 “programmed activities” – four or five-hour shifts – a week, but most consultants actually carry out 11 or 12. But these extra shifts are being refused by clinicians worried by their tax exposure, with a rapidly escalating effect on waiting lists.

Consultant radiologist Dr Tony Goldstone told the Guardian that “The pensions catastrophe is an existential threat to our NHS. We’re only just beginning to see the impact of these taxes. As more doctors get affected, it’s going to get a lot worse.”

But now, senior clinicians will have their say on the new 50:50 option, which lets them halve their pension contributions in exchange for halving the rate of pension growth.

This should help them avoid cutting their hours and allow them to work additional shifts to reduce waiting lists.

At present, clinicians have an option not to pay any tax up front on money that is saved into their pensions and can instead choose for the NHS pension scheme to pay the tax bill now. The scheme then recoups the interest by taking it off their pension fund at retirement.

The aim of the consultation is to make the Scheme Pays arrangement more transparent, so staff can better assess how deferring payment will affect their pensions.

Although the NHS pension scheme was recognised as one of the most generous in the private and public sectors, the Department for Health and Social Care’s announcement noted that “the tapered annual allowance means some clinicians are facing significant tax bills.” The tapered allowance was introduced in 2016 and reduces the amount that high earners can save into their pensions tax-free.

The department calculates that about a third of NHS consultants and GP practice partners have earnings from the NHS that could potentially lead to them being affected by the tapered annual allowance. This had led to some clinicians changing their working behaviour, it stated.

Hancock said: “Too many of our most experienced clinicians are reducing their hours, or leaving the NHS early because of frustrations over their pension.

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“I want them to know that I am listening and I want to work with them to fix it for the sake of patients.

“We want to make it easier for our hardworking senior doctors to balance their workload, their pension pot and their tax bill ‒ with more flexibility, more choice, and less need to pay upfront.

“It’s vital any changes are based on real experiences and I urge all consultants, senior nurses and GPs to have their say.”

Danny Mortimer, chief executive of NHS Employers, said: “We welcome this new consultation which shows a willingness and commitment from government to reform the scheme to address the impact of pension taxation on NHS staff, organisations and service delivery.

“It is especially welcome to see the government is not only asking for feedback on their original proposal to introduce a 50:50 section for senior clinicians, but is actively seeking views on alternative solutions and proposals.”

He added that the consultation, which runs for 12 weeks, recognises the importance of the work of the pension scheme advisory board, through which NHS Employers is leading the development of a recommendation on introducing scheme flexibilities for the benefit of all NHS staff.

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Adam McCulloch

Adam McCulloch first worked for Personnel Today magazine in the early 1990s as a sub editor. He rejoined Personnel Today as a writer in 2017, covering all aspects of HR but with a special interest in diversity, social mobility and industrial relations. He has ventured beyond the HR realm to work as a freelance writer and production editor in sectors including travel (The Guardian), aviation (Flight International), agriculture (Farmers' Weekly), music (Jazzwise), theatre (The Stage) and social work (Community Care). He is also the author of KentWalksNearLondon. Adam first became interested in industrial relations after witnessing an exchange between Arthur Scargill and National Coal Board chairman Ian McGregor in 1984, while working as a temp in facilities at the NCB, carrying extra chairs into a conference room!

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