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Gold, incentives and meh

The Government has been covertly capping GPs’ pensions

Editor’s blog

I have all the respect in the world for pensions experts. Having spent weeks getting my head around NHS pensions, I don’t know how anyone can understand their intricacies (while retaining the will to live).

But I am starting to think that this complexity serves a purpose for the Government. The discussion around pensions tax reliefs, tapers, annual and lifetime allowance, and so on, hides a simple truth: the Government cannot afford NHS pensions and is doing all it can to limit the amount it pays out.

As our analysis on page 20 shows, there has been a series of reductions to pensions tax allowance since 2010 that have overwhelmingly affected GPs and consultants on the NHS Pension Scheme.

Ministers have insisted the reason for the reforms is to help raise revenue. However, taxing the highest earners hardly fits the philosophy of the Conservative Party. At the same time as introducing this tax hit on pensions, the Coalition Government reduced the highest rate of income tax from 50% to 45%.

So what is going on? When researching our pensions analysis, I came across a fascinating figure. The Government raised £517m from individuals who exceeded their tax relief allowance in 2016/17, the year the reforms really kicked in, up from £143m in 2015-16.

Yet the Department of Health and Social Care’s consultation states the tax reforms are saving £7bn a year. When I asked about this discrepancy, I was told the £7bn figure factors in ‘behavioural changes’.

Government should come clean and admit it cannot afford NHS pensions

You don’t have to be a tinfoil hat conspiracy theorist to posit that the reason for these reforms is not to raise revenue but to place a de facto limit on NHS pensions liabilities.

And it is working. GPs and consultants are refraining from increasing their pensions because it makes no financial sense. What the Government hadn’t taken into account, however, was the unintended consequences. In their greed, ministers placed such limits that GPs and consultants were being penalised for the very act of working. So they cut shifts and even retired early.

The DHSC’s solution – to allow doctors to increase their pensions at their own rate – is doomed to fail, as tax relief rules remain far too complicated.

But I have a proposal. The Government should come clean and admit it can’t afford NHS pensions.

Instead of imposing a baffling tax relief system that is stopping GPs from working, just cap the pensions themselves. When a doctor reaches £1.055m – the lifetime allowance before a tax charge kicks in – they simply can’t put any more in. The Treasury may miss out on half a billion of revenue but this would pale into insignificance when set against the fall in pensions liabilities.

So what’s in it for GPs? No penalties. Less worry. The option of a private pension. And not really giving up much – after all, the current de facto limit is brutal.

When I put this idea on PulseToday, some made the point that it relies on Capita keeping proper records. But this shouldn’t be a block – Capita should be forced to get its act together regardless.

The situation is untenable. And a bit of honesty from ministers would go a long way to finding a solution. I fear their current proposals will do little to stem the tide of early retirements and GPs cutting their hours.

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

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Readers' comments (11)

  • Jaimie, this is in effect what is happening. Those (full-time GP) that saw the bus coming stepped out of the road and out of the scheme when they got to 50. Those that didn't are paying for their inattention.

    What you don't say is what a betrayal of trust this is. We agreed to work for 40 years and put up with the nights, the OOH, the appraisals, and all the bullying and mistreatment in return for a promise and understanding of a decent pension at the end. We're 30 years in, and the final pension has been capped from a projected £60K to £40K effectively - that's a reduction of £500,000 projected pension income for those of us that don't drop dead from burn-out.

    No wonder that we're all walking

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  • spot on.

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  • If you can get a valuation-the last figures I can access are from 14 to 31/3/2015.#
    No ome seems to know how much is there-so how can they tax me????

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  • JAIMIE, THIS IS TRUE...READ THIS.

    I MET SOMEONE WHO WORKED FOR THE GOVERNMENT PENSIONS AGENCY IN THE 1980S UNDER THATCHER AND THEY TOLD ME THAT THEY WERE "INSTRUCTED" TO NOT (READ THAT AGAIN..NOT) TELL PEOPLE WITH MESOTHELIOMA THAT THEY WERE ENTITLED TO COMPENSATION...UNLESS THEY "SPECIFICALLY ASKED" AND AT THE TIME MANY HAD NO IDEA THEY WERE ENTITLED!!!
    I WAS GOING TO WRITE TO THE MEDIA ABOUT THIS BUT NOBODY WOULB BE INTERESTED.

    THE ONLY DIFFERENCE BETWEEN THE GOVERNMENT AND THE MAFIA IS THAT IF YOU LEAVE THE MAFIA ALONE, THEY WILL LEAVE YOU ALONE.

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  • No one admits they are running a Ponzi scheme!

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  • Spot on, Jaimie and Coppernicus!

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  • You’d have to be a very foolish person to pay any money into the nhs pension scheme

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  • Covert??? :)

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  • you guys are correct but the issue is that it is yet a good system. Look at the pension section in the money saving expert forum. People wished they had access to the NHS pension system and envy us...do we know something they don't?

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  • Brilliant article.The second paragraph says it all. The complexity serves a purpose for the Government.....the trust is gone and goodwill to help is gone. Nobody wants to be poorer helping or working harder.

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