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A radical solution for NHS pensions

Editor’s blog

We’ve had an ‘interesting’ morning getting our heads around pensions and the Government’s suggestions today.

First, I’d say it is good that ministers are acknowledging something needs to be done. The current situation – whereby GPs and consultants are having to cut hours to avoid big tax penalties - is ridiculous for GPs, consultants, ministers and patients.

The reforms aren’t perfect. It seems that there will still be uncertainty for GPs unsure whether they will hit their limits. The proposals explain the Treasury is looking into the tapered allowance that is causing more problems and uncertainty, but no more than that. But at least they are taking some action.

However, I feel what we need more than anything is complete honesty from ministers. The fact is the Government can’t afford the NHS Pensions Scheme. It is basically a Ponzi scheme that relies on future generations continuing to pay in ad infinitum.

But allowing all doctors to get to this limit at their own pace, with no threat of a tax charge removes the uncertainty and doesn’t punish doctors for increasing hours

The Government’s solution to this has been to use a punitive tax system to try and limit NHS pensions, and this is not the purpose of the tax system. I truly believe that the main reason the limit on lifetime pensions tax allowance (£1.055m – with anything contributed above that being hit with a 55% tax charge) was brought in was to impose a de facto limit on NHS pensions. True, they receive taxation from other high earners, but I’d say this is of minimal consequence when compared with the potential liabilities from the NHS Pensions Scheme.

So here is my radical suggestion. Why not just bring in a real limit on NHS pensions at £1.055m, adjusted every year for inflation, without using the punitive tax system? That is, doctors are told at the end of the tax year that their pension pot is full, and there is no point in putting more in. To illustrate this, with a limit of £1.055m on the 1995 scheme, GPs would be eligible for a pension worth £45,870 and a tax-free lump sum of £137,610.

If doctors want higher pensions, then they can use a private pension (which will cost the Treasury nothing). How this is done in reality, I don’t know, and I am sure there would be a number of technical problems.

But allowing all doctors to get to this limit at their own pace, with no threat of a tax charge – either annual or lifetime - removes the uncertainty and doesn’t punish doctors for increasing hours. Which is what we should all be aiming for.

Jaimie Kaffash is editor of Pulse. Follow him on Twitter @jkaffash or email him at

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Readers' comments (6)

  • 5 stars ***** Not just the one that I hovered over!
    This seems a really good idea to me.
    One of the problems with the current annual cap or taper is that it particularly penalises anyone who has had a career break (mostly women, but includes any who have worked e.g. in developing countries).
    This suggestion would overcome that too.
    All best wishes!

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  • This fails because it makes an assumption of competence in record keeping. In recent years I’ve gone from being an added years payer to an ex pension payer as the scales fell from my eyes, aside from tax issues. My requests for accurate figures from NHS Pensions are met with incredulity. I’ve lost any faith that when I draw my pension in 10 years they’ll have the first clue what I am owed. And there’s the problem. Without trust in the system, there is no system. Contrast it with private sector financial service products: any company who couldn’t give you a real time balance of your holdings would be DOA.

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  • ....and don’t get me started on Total Rewards Statements, which are entirely ridiculous and “can’t cope with GP Payments”. At a minimum, every paying member should get a free annual statement of what they paid in, what they hold, and how much this would equate to assuming they retired next 5th of April. But this is beyond them.

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  • Just to add, since when was the 'rational/sensible solution' opted for by the state? :) Oh no, simplifying the tax/pension code might mean having to downsize HMRC.... and we can't do that, obviously......

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  • Grinding..
    Nail, head, hit
    Top of the class!
    Carthago delenda est

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  • ItSaDoGsLiFe

    Totally agree with Grinding.
    Just had my TRS statement updated to 2016/17, that's after a 3 year wait since last update.

    Annual allowance statement (despite repeated requests) still pending.


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