Hospital Dr News

Government launches new, more radical consultation on NHS pension taxation

The Government has launched new pension proposals in a bid to diffuse the row over doctors being hit by additional tax bills.

It supersedes Theresa May’s consultation launched on 22 July which offered to introduce more pension flexibility.

The pensions row has been linked to problems will filling rotas in hospitals and a rise in waiting times for routine surgery caused by medics refusing to work beyond their planned hours.

Many senior doctors have been landed with massive, unexpected tax bills in addition to their usual tax payments – some upward of £50,000.

The new consultation includes more radical proposals which allow doctors complete flexibility when it comes to scaling down their pension contributions to avoid breaching the annual tax-free allowance.

The allowance has been reduced from £255,000 a year in 2010-11 to £40,000 – and drops still further for the highest earners.

This tends to affect those earning more than £110,000, around a third of senior doctors and GPs.

Previously the government had said it favoured a 50:50 option whereby public sector staff could forsake half the amount paid into their pension.

But now ministers have said they will publish a consultation in the coming weeks which favours giving public sector staff the ability to reduce contributions to zero.

It will also allow doctors to be given the contributions the employer would have made, meaning their pay packets could be boosted by thousands of pounds a year.

Meanwhile, the Treasury has agreed to look at how public sector workers are taxed on their pensions to see if the rules can be relaxed.

This will not involve reviewing the £40,000 threshold, but instead will focus on how that reduces to £10,000 as more is earned.

Siva Anandaciva, Chief Analyst at The King’s Fund, said: “Hospital consultants, GPs, nurses and managers are turning down additional work and promotions to avoid big tax bills and this is having a real and immediate impact on patient care, with reports of cancer scans going unread and weekend and evening operations being cancelled.

“The government’s proposed changes to pensions will help to retain some senior clinicians, but it appears that health service managers have been left out of the plans, despite high vacancy rates in  board roles such as director of operations, finance and strategy, something the pensions issue will only exacerbate.”

Dr Chaand Nagpaul, BMA council chair, welcomed the move but wants the government to remove the taper.

He said: “The Government has listened to us on offering full flexibility – meaning doctors can choose the amount they and their employer wish to put away – and we note the assurance that this will not mean doctors ‘losing out on the value of unused employer contributions’. This must mean full recycling of what the employer would normally contribute being paid back into doctors’ salaries.

“The new proposed flexibilities will provide short-term relief for many doctors, but they themselves do not tackle the core and underlying problem. This lies in tax reform, and as we have said before, it is the overhaul of the annual allowance and tapered annual allowance, that will make a difference to all doctors, including consultants, GPs and medics in the Armed Forces.”

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