The changes would allow GPs to decide how much of their income they wish to pay in contributions in exchange for a reduced accrual rate. The Treasury has also said it will review the tapered annual allowance to ensure it 'operates to support the delivery of public services'.
The plans have been put forward after the BMA and NHS trusts heavily criticised the DHSC's original intention to restrict any flexibility to a 50:50 option only, which would allow clinicians to halve their pension contribution in exchange for halving the rate of pension growth. The government launched a consultation on that option at the end of last month.
Under the DHSC’s new proposals, pension members would be able to set the level of pension contribtion and accrual at the start of the year at any percentage in 10% increments. If a member paid in 30% of their normal contribution their pension would have a 30% accrual rate.
If a clinician elected to reduce their contributions, employers would have the option to 'recycle' the unused employer's contribution back into the individual's salary, the DHSC said.
Doctors who reduce their contributions would be able to increase their pension at the end of the year using 'additional pension top ups', which already exist as part of the scheme, if they had a better idea about their total earnings and where they stood in relation to the annual allowance at this point.
The changes will be subject to a new consultation, due to be published shortly, and will come into effect from April 2020.
The DHSC said it will issue guidance to employers soon settingout how they can provide staff with 'local flexibility' so that they did not breach the annual allowance limit in this financial year.
This would include options such as recycling employer pension contributions into salaries if doctors decide to opt-out of the pension scheme mid-year and 'offering local defined contribution schemes', the DHSC said.
BMA chair Dr Chaand Nagpaul welcomed the changes, but he added: 'The new proposed flexibilities will provide short-term relief for many doctors, but they themselves do not tackle the core and underlying problem. This lies in tax reform, and as we have said before, it is the overhaul of the annual allowance and tapered annual allowance, that will make a difference to all doctors, including consultants, GPs and medics in the armed forces.
'This situation has arisen as a result of tax policy created by Treasury and it is now up to the new chancellor to be bold in resolving it. We know that more than a third of doctors have already reduced their work commitments over pension tax charges, and of those who haven’t already, a third plan to. Without fundamental change to these rules, this situation will only worsen, leaving patients with fewer experienced medics to care for them and even longer waits for treatment.'
Chancellor Sajid Javid said: 'This government is committed to ensuring that British people see a real difference in public services, including getting quicker GP appointments, and a reduction in waiting times. Critical to that is introducing flexibility into the system so that our hospitals have the staff they need to deliver high-quality patient care, which is why we’ve listened to concerns and will be reviewing the operation of the tapered annual allowance. This will help to support the delivery of our vital public services.'
The DHSC said it will also consult separately on phasing the 'pensionability' of pay increases for high earners. It said that one-off substantial increases in pensionable pay could create spikes in pension growth in a particular year meaning individuals would breach annual allowance limits. Phasing in the amount any pay rise or promotion contributed towards a pension over a three-year period could help 'smooth such spikes'.
A BMA poll published last week found that three quarters of GPs had reduced their working hours or plan to do so because of punitive tax charges on pensions. The survey also found that in some parts of England, almost every GP had either already reduced their working hours or planned to do so to avoid the tax penalties