This site is intended for health professionals only


Government rejects calls for changes to GP pensions taxation


Pension portal


The Government has rejected calls to reform GP pensions taxation, arguing that the problem has already been addressed.

The BMA called it a ‘wasted opportunity’ for real pensions reform, while GP financial advisers called the current measures a ‘sticking plaster’.

In March, the Government raised the threshold income at which doctors see their tax-free pension allowance tapered, from £110,000 to £200,000, and announced the minimum level for reduction of the tapered allowance would be £4,000.

The changes, announced as part of the annual Budget, were designed to ‘ensure that pensions tax rules do not deter doctors from taking on additional shifts’, but the BMA and pensions experts warned the measures ‘do not go far enough’.

Now the Government has said that the 2019 reforms have addressed issues with the tapered annual allowance in the NHS, claiming that ‘up to 96%’ of GPs have been removed from the taper calculation as a result.

In its response to a consultation on further reforms, published this week, it said: ‘The Government’s review concluded that raising the thresholds was the quickest and most effective way to solve the issue and delivers a tax solution which was preferred by most consultation respondents as a simpler alternative to flexibility that many feared would add to the complexity of the pension scheme. 

‘As a consequence, the department does not intend to proceed with proposals to introduce pension scheme flexibility for senior clinicians.’

It added: ‘The incentive to take on additional NHS work is now restored, and from 6 April 2020 clinicians can earn at least an additional £90,000 before reaching the new threshold income.’

A ‘limited number of the very highest earners in the NHS’ will still remain in the scope of the taper, it said.

However, the BMA said it is ‘disappointed’ that calls for a more ‘long-term solution’ to the ‘complex pension taxation system that penalised doctors for going to work’ have been dismissed.

BMA pensions committee chair Dr Vishal Sharma said: ‘Many doctors with incomes far below the revised threshold income still face large tax bills as a result of exceeding the standard annual allowance, which remains at £40,000. 

‘This can happen simply following a modest rise in pensionable pay , for example when receiving a pay increment, taking on a leadership role or being recognised for clinical excellence.’

He added: ‘The NHS entered the pandemic with historic workforce shortages, and it needs to retain every doctor it has as we face the daunting prospect of moving through this second wave and into the recovery stage of the pandemic. 

‘This decision a wasted opportunity to truly reform the complex pension taxation system that continues to disincentivise our most experienced doctors from offering their full potential to the health service and their patients.’

And Parminder Gill, advice policy consultant at specialist GP financial services mutual Wesleyan, told Pulse that while the 2019 changes ‘have helped some higher earners’, they are ‘a sticking plaster rather than a solution to the complexities around annual allowance’.

It comes as GPs will be able to make a ‘deferred’ decision when they retire about which pension scheme to be part of, under changes confirmed by the Government.

In July, the Government published a set of proposals designed to alleviate age discrimination against GPs who were moved onto a new NHS pension scheme in 2015.

Under the proposals, GPs on the NHS pension scheme who were moved from legacy pension schemes in 2015 to new pension schemes would be able to choose which they receive benefits from in the period between April 2015 and March 2022 (the ‘remedy period’).

The Government has this week published its response to the consultation on the proposals, confirming that GPs will be able to choose which option they want to take at the time they start drawing their pension.

They will be deemed to have accrued benefits in legacy schemes during the ‘remedy period’ rather than the reformed schemes until they have made a choice, the Government said.

And those already retired and/or receiving a pension will be given the choice ‘as soon as practicable’ after the changes are implemented, with the decision applied ‘retrospectively’ to their award, it added.

The document said: ‘Whilst the courts found that the transitional protection arrangements in introducing the reforms were unlawfully discriminatory, the reforms themselves are not. 

‘From 1 April 2022 therefore, anyone who remains in service will do so as a member of their respective reformed scheme, meaning everyone is treated in the same way in this respect.’

Dr Sharma called the move ‘common sense’, due to both the ongoing pandemic and doctors’ ‘unpredictable’ career progression.

However, he added that while the deferred choice was ‘the only acceptable option’, the Government’s ‘failure’ to ensure that those who already made career decisions based on the age discrimination can rectify them is ‘worrying’.

He said: ‘Doctors may have opted out of the scheme, taken early retirement, cancelled added years contracts or decided to work part-time, with knock-on effects to their pension entitlement. 

‘The Government has said that these decisions will be assessed on a case-by-case basis, requiring doctors to prove that these decisions were made as a result of the discrimination.’

This will create a ‘huge administrative burden for doctors when they should be focusing on patients’ and members should be given ‘automatic eligibility’ to purchase any pension entitlement lost ‘in certain circumstances’, he added.

And the BMA is ‘concerned at the suggestion that members will be footing the bill for these changes’, Dr Sharma said.

Pulse has long documented the impact of the current pension rules since reporting in 2019 that younger GPs had chosen to cut their clinical hours to avoid extra pension charges, while more recently four in 10 GPs said they had reduced their shifts over fears of being hit by huge pension tax bills and prohibitive pensions taxation is also causing GPs to consider early retirement.