Government talks on NHS pension tax crisis 'close to conclusion'

Talks between government ministers on how to stop punitive pensions taxes undermining the NHS workforce are nearing a conclusion, chancellor Philip Hammond has told MPs.

Chancellor Phillip Hammond (Photo: Daniel Leal Olivas/Getty Images)
Chancellor Phillip Hammond (Photo: Daniel Leal Olivas/Getty Images)

The chancellor admitted this week that there was 'some evidence that the annual allowance charge is having an impact on the retention of high-earning clinicians in the NHS'.

He told MPs: 'Both the Treasury and the DHSC wish to address this problem. We have to find a mechanism that does it in a way that is fair and appropriate. The right way to do it is through increasing flexibilities within the NHS and, potentially, other public sector schemes.'

Mr Hammond said that he had been discussing the problem with health and social care secretary Matt Hancock 'for some time' and that Mr Hancock would make an annoucement 'soon'. He added: 'I think we are close to reaching a conclusion.'

NHS pensions

The chancellor's statement on the impact of pensions taxes on the NHS workforce came in response to questions from MPs on both the government and opposition benches.

GPonline reported this week that one in three GPs had been forced to reduce work or refuse shifts to avoid punitive taxes that can leave doctors losing money for working more.

BMA leaders have warned that the problem is threatening to leave the NHS facing a 'massive loss of capacity'. The association's GP committee chair Dr Richard Vautrey said this week: 'This is a major and growing problem and is one of the key factors undermining GP workforce retention.'

He said GPs were 'increasingly faced with punitive tax bills, over which they have little control or warning' - adding: 'At a time when patients are struggling to get appointments this is a serious loss to the service and government must take this situation much more seriously.'

Annual allowance

Mr Hammond told parliament on Tuesday that the NHS pension scheme was 'among the most generous pension schemes available in this country today', and said the tapered annual allowance mechanism was intended to ensure that tax relief for the highest-earning pension savers was 'not disproportionate to that of other savers'.

But he added: 'However, I do accept that there is some evidence that the annual allowance charge is having an impact on the retention of high-earning clinicians in the NHS. I am in discussion with my right hon. friend the health secretary about how to provide additional pension flexibility for NHS doctors affected by the annual allowance tax charge, and he will make an announcement as soon as possible.'

Under proposals put to the government by the BMA and NHS England as part of the five-year GP contract agreement earlier this year, GPs and other doctors could be allowed to halve the rate at which their pensions build up by halving their contributions.

The 'partial pension' plan would mirror a 50% option that already exists in the local government pension scheme, and could delay the point at which doctors hit annual allowance or lifetime allowance limits - triggering tax charges that are forcing many doctors to cut working hours or stop work altogether.

However, accountants and BMA leaders have warned that the move does not go far enough - and have called on the government to consider further - and more radical - options.

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