The Government has frozen the lifetime allowance for GP pensions until at least 2025/26 in today’s budget statement.
Ahead of the announcement, the BMA had warned that such a move, which is designed to raise more tax, could lead to a ‘catastrophic exacerbation’ of NHS workforce shortages.
Today’s statement also confirmed that the vaccination programme is to get a £1.65bn funding boost.
However, the BMA and RCGP’s calls on the chancellor to include urgent Covid funding for general practice in the budget went unheard.
The lifetime allowance is the maximum amount you can put into a pension pot without triggering an extra tax charge. If a pension pot exceeds the allowance, it is then taxed heavily when you retire.
If it is taken as income, it will incur an extra 25% charge, and if taken as a lump sum, then it will be 55%.
The budget document said: ‘The inheritance tax thresholds, the pensions Lifetime Allowance and the Annual Exempt Amount for Capital Gains Tax will be maintained at their existing levels until April 2026.’
It specified that this means it will be maintained ‘at £1,073,100 up to and including 2025/26’.
The BMA had warned this change could lead to doctors reducing their hours or retiring early, which would exacerbate pressures on an already stretched workforce.
Today, BMA pensions committee chair Dr Vishal Sharma said: ‘Freezing the pension lifetime allowance is a bad decision and is creating the perfect storm – forcing an exhausted workforce – many of which are already planning to work fewer hours – to make some very tough decisions such as working less hours or leaving the NHS long before they would naturally retire.’
A pre-emptive BMA member survey showed 72% of doctors were likely to retire early as a result of such a freeze.
And Parminder Gill, an adviser at Wesleyan Group, said it would come as ‘a real kick in the teeth to high-earning clinicians who will have been working around the clock on the frontline of the coronavirus pandemic’.
He added: ‘These are individuals who have historically been at risk of breaching their allowances and being stung by punitive tax charges. The constant tinkering with the lifetime allowance makes it difficult for doctors to plan for the long-term and could ultimately discourage them from saving into a pension.’
Regarding the vaccination programme, the budget document said: ‘The Government is allocating £1.65bn for 2021/22 to continue the vaccine deployment programme in England, and the devolved administrations are receiving additional funding through the Barnett formula in the usual way.’
It also allocated:
- ‘£5m on top of £9m funding to help create a “library” of mRNA vaccines for Covid-19 variants for possible rapid response deployment, and £28m to boost the UK’s vaccine testing capacity’.
- As well as £22m ‘for new and expanded vaccine studies’.
‘This will fund the expansion of the world’s first trial of combining different vaccines as part of a two-dose regime’, the document said, as well as ‘the world’s first study assessing the effectiveness of a third dose of vaccine to improve the response against current and future variants of Covid-19’, the document said.
Regarding the future outlook for the UK economy, the budget hailed the ‘success of the UK’s vaccine programme’ which it said meant the Government ‘has been able to chart a course out of lockdown and will begin to cautiously ease restrictions in a way that will facilitate economic activity, while continuing to protect public health and NHS capacity.’