GPs face pension tax penalties worth 'half their post-tax income'

Rapid swings in inflation could leave GPs facing pension tax penalties worth 'half their post-tax income' in 2022/23 for pension growth they never benefit from, doctors' leaders have warned.

BMA House entrance

Doctors at the BMA annual representative meeting in Brighton called for urgent steps to stop doctors who are continuing to work for the NHS being forced to quit the health service pension scheme - and for measures to put right pension age discrimination to be sped up.

The conference backed a call for 'pension recycling' to be made available by all NHS employers so that doctors who had no choice but to drop out of the pension scheme to avoid punitive tax charges are not denied a key part of their pay.

Delegates at the ARM heard that pension tax liabilities were a 'particular issue' for GPs in England because of problems with the availability of up to date pensions records.

Pension tax

A government minister admitted earlier this year that nearly 20,000 GP pension records were 'in error' - leaving thousands of doctors without access to up-to-date information on their pensions and unable to complete annual allowance tax calculations.

GP Dr Chrissie Clayton told the conference: 'Given the uncertainty around their current level of pension benefits, doctors cannot make informed decisions about either their retirement plans or whether they need to limit their working hours to prevent incurring future pension tax liabilities.'

She said some doctors had already retired early, opted out of the NHS pension scheme or reduced their working hours over pension age discrimination and warned that a lack of progress on remediation and ongoing uncertainty meant many were still unable to make informed decisions.

Dr Clayton added that the pension dynamising factor in the NHS scheme was a 'massive problem for GPs' because soaring inflation this year will drive large growth in pension pots that pushes many doctors over the annual allowance limit, leaving them facing substantial tax penalties.


However, as inflation drops in future years, the pension growth that triggered the tax penalties will be wiped out and GPs will be unable to claim tax back against it - meaning the growth GPs are taxed on will never benefit them.

'It will potentially see GPs incur annual allowance tax bills of around half of their post-tax income for pension growth that is simply due to inflation,' Dr Clayton told the ARM.

'Yet it is likely that this pension growth will simply disappear next year if inflation falls as predicted, meaning GPs will have been taxed on benefits they will never receive. The government must urgently remedy the situation.'

Doctors at the conference said the long-term solution to problems with pension tax forcing doctors out of the profession was to apply a solution similar to the tax-unregistered scheme for the judiciary, which means the annual and lifetime allowance caps do not apply - and that members instead have no tax relief on their pension contributions.

In the meantime, however, pension recycling - paying unused pension contributions as additional salary that is then taxed - is the BMA's favoured option.

BMA pensions committee chair Dr Vishal Sharma told the conference that the government had said it supported pension recycling, and that it was 'shameful' for NHS employers not to offer it as an option to doctors.

Motions passed by BMA ARM:

  • Motion by SASC CONFERENCE AGENDA COMMITTEE: That this meeting demands that the BMA ensures that the remedial measures following the McCloud judgment should be expedited and that all senior doctors be able to assess their tax liability with the recalculated annual benefit statements for the remedy period (2015-2022).
  • Motion by EAST OF ENGLAND REGIONAL COUNCIL: That this meeting notes the significant number of senior doctors who are coming off the pension scheme and still working for the NHS to deliver high quality care to the UK population due to punitive pension taxation and insists all NHS employers offer pension recycling.

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