Wider NHS pension reform needed to remove overtime deterrent

More than half of GPs who retired in 2018-19 took early retirement.
Image: Shutterstock.

Plans to offer NHS doctors more flexible pensions will need to be part of wider reforms if the government wants to stop clinicians feeling forced to reduce their hours to avoid tax difficulties, the British Medical Association has warned.

Earlier this year the BMA told Chancellor Phillip Hammond that senior doctors were better off going part-time because changes to the tax annual allowance and the NHS pensions scheme meant that a senior doctor working a 3.5 day week could receive an annual pension of £65,000, compared with £55,000 if they worked a five day week.

But following the launch of its interim People Plan this week, the Department of Health and Social Care announced it will consult on proposals to offer senior doctors a new retirement saving option that will let them gradually build their pension over their career without facing significant tax charges.

The 50:50 option will allow clinicians to halve their pension contributions in exchange for halving the rate of pension growth, which will help them avoid hitting the tax-free threshold. This would enable them to take on additional shifts to alleviate pressures on NHS workload, without having to worry about the tax implications.

Staff with a defined contribution or defined benefit pension scheme can save up to £40,000 a year before having to pay tax. However, savers in the NHS may exceed this allowance just by being long-term members of the pension scheme or for working overtime, according to the BMA.

The government said 57% of GPs who retired in 2018-19 took early retirement, with many stating that their pension was a factor in their decision.

Health and social care secretary Matt Hancock said the reforms will give doctors greater flexibility to manage their pensions and “have more control over their future”.

“Each and every senior consultant, nurse or GP is crucial to the future of our NHS, yet we are losing too many of our most experienced people early because of frustrations over pensions,” he said.

“We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.”

Dr Chaand Nagpaul, BMA chair of council, said the association welcomed the fact that the government had acknowledged the problem, but said the 50:50 option alone would not stop doctors reducing their working hours.

“Given the complexities of the NHS pension scheme and the fact that individual circumstances vary, it is essential that any flexibility offers far more than simply paying half of the employee’s contribution in order for half the accrual of pension. There needs to be the ability to recycle the employer’s pension contribution on the percentage of pay that is no longer pensionable. This is commonplace in other sectors with the chancellor describing such payments as ‘regular’,” he said.

“In addition given the unintended consequences that have arisen as a result of separate changes to the NHS pension scheme and the introduction of the tapered annual allowance, it is essential that these options are no more than a short term mitigation whilst the much needed reform of the pensions taxation system is undertaken”.

However, Dr Tony Goldstone, a consultant radiologist and adviser on pay and pensions for the BMA, believed the proposals were a pay cut in effect. He told The Telegraph: “The employer contribution is part of the total reward package, and it should not be for DHSC nor employers to access this if hard-working clinicians and managers are forced out of the scheme by ill-conceived and unfair punitive taxes.

“It might work as an option to help lower-paid staff who cannot afford the full scheme, but it is completely unsuitable for those caught by annual allowance issues.”

In a statement, employer representative body NHS Employers said the plan was a positive response to the concerns it had raised, but believed the flexibility “should be available to support the retention of all members of our workforce”.

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