Next budget must fix NHS pension tax crisis, warns GPC chair

A long-term solution to the NHS pension tax crisis must be prioritised in the government's first budget to halt the drain of doctors from the health service, the BMA's top GP has warned.

BMA GP committee chair Dr Richard Vautrey (Photo: Pete Hill)
BMA GP committee chair Dr Richard Vautrey (Photo: Pete Hill)

Following the Conservatives' general election victory last week, BMA GP committee chair Dr Richard Vautrey told GPonline that ‘swift action’ was needed to eradicate the punitive tax rules that have forced thousands of GPs to reduce their working hours or reject extra shifts.

NHS England moved last month to provide a short-term solution, promising to pay doctors back for pension tax charges incurred in the current financial year. But GPC chair Dr Vautrey insisted a permanent solution must now be a top priority.

The Leeds GP said: ‘It’s nonsensical to have a system where doctors are being penalised for working harder and doing longer hours where it ultimately costs them - that’s not in anyone’s interest. So this is something that the government has to act on as a priority as it’s fundamental to the retention of highly-skilled doctors.’

February budget

The government is expected to deliver its first budget in February - and has promised a review of the pension tax issue will be complete by the time the budget is announced. The BMA has confirmed it will engage with the review, but has warned that nothing short of scrapping the annual allowance mechanism for defined benefit schemes such as NHS pensions will solve the current crisis.

Dr Vautrey called for a ‘sustainable’ agreement that would give GPs the confidence to take on extra shifts without the fear of losing out financially. An effective solution could play a key role in improving GP retention, halting the steady decline in the GP workforce, he argued.

The Leeds GP was optimistic about the BMA's chances of striking a deal with the DHSC. He said: ‘I think what we now need is the first budget of the new government to really lay out - very clearly - a solution to this long-term problem. And that requires fundamental changes to the annual allowance taxation arrangement.

He warned that GPs needed guarantees they would not be liable to punishing charges for doing extra work.

Pension tax

Under the deal set out last month by NHS England, extra tax charges doctors face for 2019/20 will be paid through the 'scheme pays' mechanism - meaning the bill will be paid off from their existing pension pot - but doctors would then be 'fully compensated in retirement for the effect of the 2019/20 scheme pays deduction'.

The BMA has backed the plan, but called for further guarantees over how it will work in primary care, where doctors are not employed directly by the NHS.

Dr Vautrey said he was hopeful of striking a deal with the government, saying it was 'unprecedented' that a short-term agreement had been reached during purdah ahead of the election.

'What's fundamental to the success of retaining GPs is addressing the pensions problem and I think that's why it has to happen within the first budget... we will have to see a very clear solution to the pensions crisis that is putting off doctors from working and staying in the service.'

Thousands of doctors have reduced their working hours or refused to take on extra shifts to avoid tax penalties that can cost them more than they earn for taking on more work - deepening the NHS workforce crisis ahead of a winter expected to be among the toughest it has ever faced.

The drop in the number of FTE GPs has been partly blamed on the pensions crisis as 340 left over the year to September 2019 - a drop of around 1.2%.

The BMA has said that along with scrapping the annual allowance for 'defined benefit' schemes, other pension flexibilities such as full recycling of employer pension contributions must remain available to ensure doctors can choose the best solution for their personal circumstances.

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