The Department of Health and Social Care and the Cabinet Office have announced a consultation on potential changes to the National Health Service (NHS) pension scheme, with the aim of enabling senior doctors to work for longer without the fear of tax charges impacting their retirement savings.
The new 50:50 pension option has been designed to allow high-earning senior clinicians to build their NHS pension pot gradually over the course of their career through steady contributions; this helps to avoid the significant tax charges that they currently face when saving for their retirement.
The new option allows senior doctors to halve their pension contributions in exchange for halving the rate of their pension growth.
The government has stated that pension tax charges discourage senior doctors from taking on extra work or additional shifts, cause them to question whether to remain in the NHS pension scheme, and lead to some taking early retirement; in 2018-2019, 57% of general practitioners (GPs) took early retirement, equating to 610 doctors, according to an independent review.
Matt Hancock, health and social care secretary, said: “Each and every senior consultant, nurse or GP is crucial to the future of our NHS, yet we are losing too many of our most experienced people early because of frustrations over pensions.
“We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.
“The reforms we are setting out will give clinicians greater flexibility to manage their pensions, have more control over their future and offer a deal that’s fair to doctors, taxpayers and the patients they care for.”
The proposal forms part of NHS’ first People Plan, published on Monday 3 June 2019. The interim plan focuses on recruiting more staff, making the NHS a great place to work and supporting employees to deliver modern care.
Steve Cameron, pensions director at Aegon added: “There has been growing disquiet among senior NHS staff about pension arrangements, with significant numbers incurring tax bills due to personal and employer contributions, or increases in pension entitlements, exceeding pensions tax allowances.
“The total amount that can be saved in a pension was cut dramatically seven years ago and the experience of the NHS shows the new rules are now affecting the retirement plans not just of the super wealthy. The prospect of tax penalties on pensions contributions has been cited by many NHS staff as a reason for choosing to retire early, a situation which means a great deal of skill and expertise is leaving the healthcare profession earlier than it otherwise would.
“We welcome the plans to address this situation by reforming the NHS scheme. Many private sector schemes allow individuals at risk of breaking pension allowances to swap pension contributions for increases in pay, and this should be made available to NHS employees. The alternative of granting special allowances just for NHS employees would have been unfair and would have further complicated the pensions tax system.”