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Chancellor freezes NHS pension lifetime allowance sparking fears of doctor exodus

Many NHS doctors will retire early or reduce their hours following pension changes announced in the 2021 Budget.

Chancellor Rishi Sunak has placed a five-year freeze on the pension lifetime allowance in a move which the BMA fears will damage the medical workforce.

Sunak confirmed that the pensions lifetime allowance would be maintained at its current level until April 2026 instead of rising in line with inflation.

BMA pensions committee chair Dr Vish Sharma called the freeze “lunacy” and warned that doctors will reduce their working hours or take early retirement to avoid punitive tax bills.

Dr Sharma wrote: ‘This is going to have a massive detrimental impact on the NHS just at the time when doctors are needed the most. This is complete lunacy especially as it will not generate much additional revenue – people will retire sooner to not pay the tax.

Income tax personal allowance and the higher rate threshold will rise next year – but then will also be frozen until April 2026, the Chancellor said.

A BMA survey of 8000 doctors a head of the Budget, suggested that 72% of responders to the question, ‘If the level of the lifetime allowance is frozen in this year’s Budget, what impact if any will this make on your plans around retirement?’, said they would be more likely to retire early.

Sharma said: “Freezing the pension lifetime allowance is a bad decision and is creating the perfect storm, forcing an exhausted workforce – many of which are already planning to work fewer hours – to make some very tough decisions such as working less hours or leaving the NHS long before they would naturally retire.

“If they don’t, they will face huge pension taxation bills because the pension scheme is not flexible enough to allow doctors to vary and manage their contributions. They simply cannot keep working and face huge pension tax bills as a result.”

The budget statement also set out plans to invest an extra £1.65bn to support rollout of the COVID-19 vaccine campaign in England, along with a further £50m to increase UK vaccine testing capability.

The BMA survey also revealed that 61% of doctors would be more likely to work fewer hours or work part time.

Disastrous impact

Dr Sharma said: “The potentially disastrous impact of this on the NHS and patient care is unthinkable, especially at current time when the impact of COVID-19 and the backlog of patient care is so acutely felt.

“Today’s move by the Chancellor is nothing short of a punitive tax on our hardworking doctors and it is simply unacceptable. The BMA has repeatedly called on the Government to find a way of mitigating against large pension taxation bills for doctors to avoid them having to leave the NHS and deprive our health services of thousands of hours of skilled care.

“Only last week, the Government announced a solution to this problem for judges, the BMA is calling for them to do the same for doctors with almost half of doctors saying they would retire later and work more hours if this was introduced.”

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