Budget must deliver long-term solution to NHS pension tax crisis, doctors warn

Next month's budget must deliver a long-term solution to the pension tax crisis that has deepened chronic NHS workforce shortages, senior doctors have told chancellor Rishi Sunak.

Budget pension warning (Photo: Peter Dazeley/Getty Images)
Budget pension warning (Photo: Peter Dazeley/Getty Images)

Just a week after the new chancellor confirmed his first budget would be delivered on 11 March, representatives of leading healthcare organisations including the BMA and the RCGP have highlighted 'drastic problems posed to the NHS workforce' by current government pension tax policy.

In a letter to Mr Sunak, the organisations warn that the NHS is 'in the midst of a workforce crisis' with rising waiting times for cancer and routine surgery, the worst A&E performance since records began and 11m paitents experiencing 'unacceptable waiting times' for appointments in general practice.

The letter says: 'We are encouraged that the government has committed to announcing a resolution to this issue in the budget, but it must be the right one; one which will safeguard the NHS workforce for the long term. We are past the point when significant action should have been taken.'

NHS pension crisis

Doctors across all branches of medical practice face 'the dilemma of incurring a disproportionate and ever-expanding pensions tax bill or cutting short their service to the NHS, reducing hours or turning down vital additional work', the letter warns.

It adds: 'We therefore call on you as chancellor to announce at the budget a complete, long-term, Treasury-led solution that enables all doctors and allied health professionals to do the xtra work that patients desperately need without the fear of incurring unexpected tax bills.

'It is essential that such a reform of pension taxation policies is implemented as soon as possible. This change is supported by the signatories of this letter and the tens of thousands of doctors our organisations represent.'

GP leaders have hit out at potential solutions to the pension tax crisis floated in the media in recent weeks. In January reports suggested the government was considering addressing the problem by hiking the income threshold at which tax on pensions kicks in from £110,000 to £150,000.

Tax penalties

The BMA warned that moving the threshold would fail to solve the fundamental problem of doctors being forced to limit the work they do to avoid punitive pension tax penalties.

Meanwhile, GPonline reported last week that GPs remained 'in the dark' over how a stop-gap solution to the pension tax problem announced by NHS England in November 2019 would apply to them.

NHS chief executive Sir Simon Stevens said doctors who had reduced their shifts could return to work over the winter because the government would pay off any pension tax bills for 2019/20. The BMA asked for guarantees about how the scheme would work for GPs - but has yet to receive any such information more than three months later.

Ian Macvie, pension and retirement planning technical manager at financial advisers Wesleyan, said a long-term solution to the pension crisis would have to involve scrapping the tapered annual allowance mechanism.

He said: 'Because of the current set-up, many senior clinicians have felt they have little choice but to turn down extra clinical work to reduce the risk of receiving a large tax bill. This has naturally had an impact on vital patient care.

'Abolishing the taper would enable clinicians to do the work that they need to without the fear of being over-taxed, while helping to simplify what is already an overly-complicated system.'

A Treasury spokesperson said: 'We want to make sure that doctors spend as much time as possible treating patients. That’s why we are urgently reviewing the pensions tapered annual allowance to ensure doctors aren’t turning down extra shifts. The review will report at March budget.'

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