NHS England has set out plans to pay off pension tax bills for doctors who breach the annual allowance limit on pension growth in 2019/20.
In a letter to the BMA, NHS chief executive Simon Stevens said he had taken the 'exceptional' decision to make the offer during an election campaign because there was 'an urgent operational requirement' to tackle a problem that has devastated the health service's clinical workforce.
NHS services that have relied for years on doctors working extra shifts have in some cases been forced to close, and BMA leaders have been warning that the NHS faces its worst winter on record.
NHS pensions
Plans put forward by NHS England will mean that doctors in the NHS pension scheme who 'face a tax charge in respect of work undertaken this year (2019/20) as a result of breaching their annual pension allowance will be able to defer this charge'.
The BMA hit out at the government for 'burying its head in the sand' for too long over the pensions crisis and warned that the proposed interim solution needed 'to be absolutely guaranteed contractually and legally' to ensure it would remain in place for doctors not due to retire for many years. The association called for more detail and said doctors needed fully to understand the offer.
The Association of Specialist Medical Accountants (Aisma), meanwhile, warned that 'significant uncertainties' remained over the NHS pension tax proposal - including 'potential for some form of down-the-line tax charge'.
Under the plans put forward by NHS England, doctors will be able to choose to pay off pension tax charges through the 'scheme pays' mechanism - and NHS England will make 'a contractually binding commitment to pay them a corresponding amount on retirement, ensuring that they are fully compensated in retirement for the effect of the 2019/20 scheme pays deduction on their income from the NHS pension scheme in retirement'.
Tax charge
Mr Stevens said clinicians were 'therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension for 2019/20'.
BMA chair Dr Chaand Nagpaul said the NHS chief executive's decision was 'a clear and unequivocal sign of the depth of the crisis the NHS faces this winter'.
He said: 'A year ago, the government and the NHS buried their heads in the sand over the crisis that was coming, a crisis that’s now here, caused by punitive pension taxation charges. The BMA has lobbied tirelessly to bring about reform of pension taxation; we remain strong in our view that the definitive solution is for a new government to scrap the annual allowance in defined benefit pension schemes as soon as possible.
'Our members, and indeed all affected health professionals, quite rightly need to understand the detail of today’s decision by NHS England and NHS Improvement to reimburse clinicians’ pension tax liabilities for 2019/20.
Legal guarantee
'This move seems to promise to ensure pensions for eligible doctors won’t be reduced at the point of retirement. However, when for many, retirement could be 30-plus years hence, the offer needs to be absolutely guaranteed contractually and legally in respect of both the payment and its’ longevity, particularly when substantial additional pension tax penalties can be incurred by taking on additional work. A much simpler solution would be for the government to write off these punitive liabilities for this year allowing time for tax reform.
'Patients are already facing severe delays in receiving routine and emergency care and staff are working under ever increasing pressure. It’s more important than ever that a new government agrees a comprehensive solution for taxation reform - preferably on 13 December - that works for all affected healthcare staff, including armed forces medical staff, GPs and others in primary and community care.'
Andrew Pow, executive board member of Aisma, said: 'This announcement may go some way to persuading NHS doctors to work the shifts needed to meet demand over the winter. However, it is important that doctors understand that the proposals relate only to their 2019/20 tax payments. Those with large annual allowance tax charges for 2018/19 will still need to pay these in January 2020.
'It is uncertain if the payment of the 2019/20 tax on retirement may lead to a benefit in kind income tax charge. While positive news at first glance, the announcement contains significant uncertainties, including the potential for some form of down the line tax charge, which may not lead to the change in behaviour that is intended.
'Doctors who have already opted out of the NHS pension scheme to avoid the annual allowance tax charges should talk to a specialist financial adviser as soon as possible to consider the pros and cons of re-joining the scheme.'
