This site is intended for health professionals only

Government consults GPs on solutions for greater flexibility in pension system

The Government is asking GPs to share ideas on how the NHS Pension Scheme could be more flexible to deter them from cutting their hours. 

Health secretary Matt Hancock today announced the release of a consultation that offers doctors the option to reduce their normal contributions towards their pension pot by half, in exchange for receiving half the amount of their pension. 

The consultation, which runs for 12 weeks, also invites respondents to submit further ideas to ensure the pension system ‘works better’ for senior staff and patient care. These include removing the current yearly limits on the amount of pension that can be purchased and greater flexibility around the amount doctors wish to put in their pension pot.

The BMA has expressed scepticism as to whether the highlighted solutions will lead to ‘tangible reform’ to end the pension crisis.

Mr Hancock last month announced plans for a flexible pension system in light of increased retention issues. However, GP leaders and accountants have warned that this solution is not enough to solve the problems, prompting the BMA to call on the next prime minister to urgently solve the pension tax crisis

Under Government proposals, high earning GPs, alongside consultants and other senior clinicians, will be able to build up their pension more slowly by making steadier contributions towards their pension, without facing regular significant tax charges’.

The consultation suggests the introduction of the 50:50 section, which would let doctors halve their pension contributions and get half the rate of pension growth in return. 

In addition, it asks whether the pension rules could be made more ‘transparent and user-friendly’ alongside introducing steps to improve the transparency of scheme pays – which allows members of the scheme who exceed their annual allowance to ask the scheme to pay their tax charge – so ‘staff can better assess how deferring payment will affect their pensions’.

The Government recognised that some clinicians consider cutting their hours and refuse to take on extra work over concerns they might breach their annual allowance.

It estimated that around a third of GP partners and NHS consultants have NHS earnings that could lead to them being affected by the tapered annual allowance. 

At the moment, the highest earning members of the NHS Pension Scheme pay at least 14.5% in contributions, but an annual allowance worth £40,000 limits the amount of money that can go into the pot each year without facing significant tax penalties. 

The annual allowance starts to reduce from this level for high-earners with total income over £150,000 per year. The minimum tapered annual allowance is £10,000, which only applies to those who earn more than £210,000. 

GP leaders previously warned that the annual allowance and concerns over large tax bills have caused serious damages to recruitment and retention, with doctors either reducing their hours or taking early retirement as a result.

BMA consultants committee chair Dr Rob Harwood said: ‘This consultation does little other than add to the intolerable dilemma facing many doctors – a commitment to their patients put in jeopardy by these ridiculous taxes which are forcing doctors to effectively pay to go to work.

‘We believe an effective consultation should have explicitly included the option to scrap the annual allowance or tapering annual allowance. However, as it stands, the Government must recognise there needs to be a full range of scaled pension membership from 10:10 to 90:90, each with recycling of the residual employer contributions.’ 

He continued: ‘A fully flexible approach like this would be cost neutral to the NHS, because the employer’s pension contributions being given up would be paid as taxable salary. Without recycling, a 50:50 approach would be a substantial pay cut for GPs and hospital doctors, and – with such an unattractive offer – almost certain to be set to fail.

‘We wanted a consultation that included realistic options to bring an end to this ridiculous, but serious, crisis we are now facing. The BMA believes the only real solution is to scrap the annual or tapering Allowances with immediate effect.’

Mr Hancock said: ‘I love the NHS and the people who dedicate their lives to caring for patients. Each and every one of them is crucial to our long term plan for the NHS, yet too many of our most experienced clinicians are reducing their hours, or leaving the NHS early because of frustrations over their pension.

‘I want them to know that I am listening and I want to work with them to fix it for the sake of patients. We want to make it easier for our hardworking senior doctors to balance their workload, their pension pot and their tax bill – with more flexibility, more choice, and less need to pay upfront.

‘It’s vital any changes are based on real experiences and I urge all consultants, senior nurses and GPs to have their say.’

The BMA recently called on NHS England to strip Capita of its entire GP contract, including processing GP pension contributions, after the private company admitted that correspondence relating to cervical screening had not been processed properly due to an administrative error.  

Maximise your practice's financial potential and compare your performance with peers with Pulse Intelligence. Register for a 30 day free trial.