The BMA has issued a warning to new Chancellor Jeremy Hunt amid reports he is planning to extend the freeze on the GP pension lifetime allowance, suggesting the move would be hypocritical.
The lifetime allowance (LTA) 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%.
Last year, the lifetime allowance – which usually rises in line with inflation – was frozen until 2025 by then Chancellor and now Prime Minister Rishi Sunak.
But the Telegraph reported on Friday that this is set to be extended for another two years, until 2027.
The BMA warned that freezing the LTA further would exacerbate what Mr Hunt himself previously called the ‘national scandal’ of pensions forcing doctors to retire early when serving as chair of the House of Commons health committee.
It said: ‘The now-Chancellor only a few months ago described the situation of doctors being forced to reduce hours or retire early because of pension arrangements as a “national scandal”.
‘But if the Government goes forward with these plans to freeze the lifetime allowance once again this scandal will become much, much worse. This will not only leave our most senior doctors with little option but to retire early, it will leave many senior nurses and other NHS workers facing the same situation.’
The proportion of GPs retiring early ‘has increased more than three-fold since 2008, closely following the real-terms reduction in the lifetime allowance’, it added.
The BMA said: ‘We saw pledges from Boris Johnson to “fix” the lifetime allowance problem, only for it to be frozen under his tenure by the now-Prime Minister when he was Chancellor.
‘[And] the new Chancellor has previously said he would give doctors “immediate exemption” from rules that force them to retire early.’
It added that any LTA freeze must be accompanied by the creation of a tax-unregistered pension scheme for higher earners in the NHS, similar to the one initiated for judges to tackle a similar recruitment and retention crisis.
The BMA also urged the Chancellor and health secretary to meet with it ahead of the autumn budget statement so that they can ‘reach a solution that will stem the flow of senior doctors away from the NHS’.
A spokesperson for the Treasury told Pulse that it does ‘not comment on speculation around tax changes outside of fiscal events’.
They added that all taxes are kept under review and any changes to the tax system will be part of fiscal announcements.
It was frozen at its current level – £1,073,100 – in order to raise more tax in March last year.
Before the freeze, the allowance had been linked to inflation and was expected to increase by 0.5%, or by £5,800, in 2021/22.
Upon being appointed as Chancellor last month, Mr Hunt reversed almost all tax cuts that had been announced in his predecessor Kwasi Kwarteng’s infamous mini-budget.
Shadow health secretary Wes Streeting has said that a Labour government would abolish the LTA cap on GP pension earnings altogether.