Chancellor's 'unfair tax on doctors' could drive 72% into early retirement, BMA warns

A five-year freeze on the pensions lifetime allowance in the government's 2021 budget is an 'unfair tax on doctors' that could drive nearly three quarters of the profession to retire early, the BMA has warned.

Chancellor Rishi Sunak confirmed in his 2021 budget announcement that the pensions lifetime allowance would be maintained at its current level until April 2026.

Doctors' leaders warned ahead of budget day that a freeze on the lifetime limit - which would otherwise have risen broadly in line with inflation - would force more doctors to reduce their working hours or take early retirement to avoid punitive tax bills.

Following confirmation that the freeze will go ahead, the BMA called the decision 'simply unacceptable' - and warned that its impact on an NHS workforce already under intense pressure from the COVID-19 pandemic could be 'disastrous'.

NHS workforce

Polling by the BMA in the run-up to the budget announcement confirmed the 'staggering' scale of the potential impact on the NHS workforce.

A survey of more than 8,000 doctors found that 72% felt a freeze on the pensions lifetime allowance would make them more likely to retire early - and 61% said they would be more likely to reduce their working hours or shift to working less than full time.

BMA pensions committee chair Dr Vishal Sharma said: 'Freezing the pension lifetime allowance is a bad decision and is creating the perfect storm, forcing an exhausted workforce - many of whom are already planning to work fewer hours - to make some very tough decisions such as working fewer hours or leaving the NHS long before they would naturally retire.

'If they don’t, they will face huge pension taxation bills because the NHS 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.'

COVID-19 pandemic

The pensions committee chair added: 'The potentially disastrous impact of this on the NHS and patient care is unthinkable, especially at the 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.'

GPonline reported last week that the government had unveiled plans to 'effectively exempt judges from pension taxation', in a move the BMA said showed the government could do more to support doctors.

The GP workforce has fallen over the past year despite government promises to increase it by 6,000 doctors by 2023/24 - and BMA polling on the impact of the COVID-19 pandemic has found that a significant proportion of doctors are considering quitting the profession once the worst of the pandemic is over.

Government figures show that numbers of GPs taking early retirement have tripled in recent years - a trend the BMA has blamed in part on pension tax, and high earning doctors remain affected by a 'tax trap' that can mean they face pension bills for more than they earn for taking on extra work despite the government raising the annual allowance threshold in last year's budget.

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