Government admits pensions policy a ‘disincentive’ to take on extra work

Health minister Jackie Doyle-Price was responding to a Westminster Hall debate called by Paul Masterton, Conservative MP for East Renfrewshire, on the effect of the tapered annual allowance on NHS pension scheme members.

Mr Masterton said high earners should pay their fair share but the doctors who had contacted him are “paying rates of over 60 per cent as a result of the taper and some are paying rates of over 100 per cent”.

Ms Doyle-Price said: “The annual allowance provides a disincentive to take on additional work – I think this is clear.”

The annual allowance taper was introduced in 2016. It restricts the amount of tax relief available to those with a threshold income over £110,000, reducing it from £40,000 to £10,000.

She said the government wants to maximise the participation of the clinical workforce and had already extended the “scheme pays” facility. Scheme pays allows members to ask the pension scheme to pay the tax charge on their behalf in exchange for a reduction in benefits.

“We will look at further messages,” Ms Doyle-Price said. “I can assure members there is considerable interest in this subject.”

She said data from the NHS pensions scheme administrator has shown of those retiring in 2016, 2017 and 2018, a third of consultants and over half of GPs took early retirement.

However, she said she does not think there is a case for “exempting GPs and consultants from a measure that is meant to apply to high earning individuals”.

She added: “I don’t think they expect to be treated differently.”

She stressed the government was listening carefully to concerns raised by NHS Employers and doctors on the impact of the tapered annual allowance, adding: “We need to be vigilant to ensure that our tax and pension benefits system does not stand in the way of delivering the best possible NHS.”

Mr Masterton said: “This issue could see us walk into a deepening workforce crisis in the NHS, and could result in consultants leaving the NHS early when they still have the skills and experience we need.”

“It is good that the BMA and NHS Employers recognise this is a serious concern, and met last week to discuss, but they haven’t agreed a solution or a joint action plan. And in reality the ball is in the Treasury’s court,” he said.

Mr Masterton added there was also an “important admission from the UK government that pensions tax reforms have changed behaviour and this will have a knock-on to capacity and care”.

Commenting on Twitter, Claire Murdoch, chief executive of Central and North West London Foundation Trust, said pensions policy is “affecting a raft of NHS talent” and “not only much-needed doctors”.

She added: “It’s driving many talented people to retire because the tax bills they receive are horrendous in some instances.”

In April 2016, the government also dropped the lifetime allowance – essentially a cap on the amount somebody can draw from their pension before being hit by additional tax charges – to £1m from £1.25m. It was increased slightly to £1.03m in April 2018.