Pension tax relief cut would be ‘damaging’ for senior NHS staff

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Reports suggest the chancellor is mulling changes to pension tax relief
Jon Restell says any changes would be ’robbing Peter to pay Paul’
The trade union calls for the government not to add more pressure on NHS managers

Any reduction in relief on pension contributions for higher rate taxpayers would be “significant and damaging for senior NHS staff”, the chief executive of Managers in Partnership has warned.

Jon Restell told HSJ that not only do NHS senior staff “already pay among the highest employee contributions in the public sector”, but also the “tiering of contributions in the NHS scheme was designed around the existing system of tax relief”.

“Any change to the system would push the contributions structure over,” Mr Restell said.

It has been speculated that chancellor Philip Hammond will cut pension tax relief in next week’s Budget to pay for the government’s commitment to fund the long term plan.

“Managers in Partnership welcomes the government’s commitment to put an extra £20 billion into the NHS, but it seems deeply unfair to potentially target public sector workers to raise this funding — this is robbing Peter to pay Paul,” Mr Restell said.

He stressed that morale and job satisfaction among NHS managers is “low enough as it is” and added recruiting for senior manager roles is “very difficult”.

“We would ask the government to seriously consider whether adding more weight to the burden of heavily under pressure NHS managers is the right thing to do,” Mr Restell said.

“Our other concern is any further cut to the annual allowance on the accrual of pension benefits, which predominantly affects public sector schemes.”

Danny Mortimer, chief executive of NHS Employers, told HSJ the organisation has sought “for a number of years to improve the way the NHS helps staff manage existing tax liabilities”.

“Whatever the chancellor decides, employers would like to see greater pension flexibilities and we have identified this to the long term plan team as a step that would support retention across our workforce,” Mr Mortimer added.

Health and social care secretary Matt Hancock revealed earlier this month that the Department of Health and Social Care had asked the NHS Business Services Authority to implement a new “scheme pays” approach for NHS workers who have breached their annual pension allowance and have to pay a tax charge.

Under a scheme pays approach, which is operated by NHS Pensions, part of the NHS BSA, individuals can ask for tax bills on pension contributions worth more than £40,000 a year to be paid out of their pension pot.

HSJ revealed earlier this month that a quarter of a million NHS staff opted out of the pension regime over the last three years, with experts blaming the “punitive” government tax system.