50:50 pension option 'will fail' says BMA as government consults on proposal

The BMA has said that a plan to allow doctors to halve their pension contributions in a bid to stop punitive taxes forcing them to reduce their working hours was 'almost certain to fail', as the government launched its consultation on the proposal.

Health secretary Matt Hancock (Photo: NurPhoto/Getty Images)
Health secretary Matt Hancock (Photo: NurPhoto/Getty Images)

The DHSC consultation on NHS pension flexibility is focused on a 'new 50:50 option', which would allow clinicians to halve their pension contribution in exchange for halving the rate of pension growth. The DHSC said it welcomed views on whether the proposal goes 'far enough' and the consultation is also asking whether there are 'other changes to the NHS pension scheme that the government should consider'.

However, the BMA said the only solution to the pension crisis that is forcing doctors to cut the number of sessions they work in order to avoid huge tax bills was to scrap the annual or tapering allowances with immediate effect. It said that the consultation should have 'explicitly included' this option.

Under the 50:50 option proposed in the consultation, ancillary benefits, such as death-in-service life assurance, survivor benefits and ill-health retirement cover, would continue to be provided in full. The consultation said that the plan meant that the annual tax charge would be reduced, 'or, in some cases, eliminated', for senior clinicians.

Reducing hours

The BMA said it was 'highly sceptical' of the content of the consultation. It said that the 50:50 proposal would leave doctors paying too much tax in some years and getting insufficient pension in others. This would mean they still have 'little choice but reduce the hours they work for the NHS to minimise the risk of incurring tax charges'.

The association said that a full range of 'scaled pension memberships from 10:10 to 90:90' should have also been included in the consultation.

The DHSC consultation acknowledged that some clinicians would prefer a more flexible approach, that enabled them to 'target their own personalised level of pension growth and contributions'. However, it said that this would 'reduce contribution income' to the exchequer and any flexibility 'must be balanced with affordability.'

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What do plans for 50% contributions mean for your pensions?

The consultation also proposes changes to the 'scheme pays' system, which allows NHS pension members who exceed the annual allowance to pay their tax charge from their pension fund. The changes would enable scheme members to better understand how deferring tax payments would affect their pensions, the DHSC said.

The consultation said that around a third of GP partners and NHS consultants could be affected by the tapered annual allowance.

This supports GPonline findings earlier this year that one in three GPs has been forced to cut back on work or refuse shifts to avoid the taxes that can mean they lose money for working more. The BMA has warned that even GPs in their 30s have been advised by accountants to reduce their working hours to avoid incurring annual allowance tax charges.

Intolerable dilemma

BMA consultants committee chair Dr Rob Harwood said: 'This consultation does little other than add to the intolerable dilemma facing many doctors – a commitment to their patients put in jeopardy by these ridiculous taxes which are forcing doctors to effectively pay to go to work.

'We believe an effective consultation should have explicitly included the option to scrap the annual allowance or tapering annual allowance. However, as it stands, the government must recognise there needs to be a full range of scaled pension membership from 10:10 to 90:90, each with recycling of the residual employer contributions.

'A fully flexible approach like this would be cost neutral to the NHS, because the employer’s pension contributions being given up would be paid as taxable salary. Without recycling, a 50:50 approach would be a substantial pay cut for GPs and hospital doctors, and - with such an unattractive offer - almost certain to be set to fail.

'We wanted a consultation that included realistic options to bring an end to this ridiculous, but serious, crisis we are now facing. The BMA believes the only real solution is to scrap the annual or tapering allowances with immediate effect.'

Health secretary Matt Hancock, said: 'I love the NHS and the people who dedicate their lives to caring for patients. Each and every one of them is crucial to our long-term plan for the NHS, yet too many of our most experienced clinicians are reducing their hours, or leaving the NHS early because of frustrations over their pension.

'I want them to know that I am listening and I want to work with them to fix it for the sake of patients. We want to make it easier for our hardworking senior doctors to balance their workload, their pension pot and their tax bill – with more flexibility, more choice, and less need to pay upfront.

'It’s vital any changes are based on real experiences and I urge all consultants, senior nurses and GPs to have their say.'

The consultation will run for 12 weeks, with the aim of introducing any changes from April 2020. 

Click here to take part in the consultation

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