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GP pensions to be ‘more flexible’ to improve retention

The Government has announced a review to make pensions ‘more flexible’ for GPs in a bid to tackle retention issues. 

Under new plans released today, the Government will reform the pension system to enable high earning GPs, alongside consultants and other senior clinicians, to build up their pension more slowly by making steadier contributions towards their pension, without facing regular significant tax charges’.

The Government has suggested a 50:50 section, which would see doctors reduce their normal contributions towards their pension pot by half and receive half the amount of their pension in return. 

Under the current NHS pension scheme, the highest earning GPs have to pay 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.

Only those who have built up more than £40,000 in contributions in their NHS pension in a year and/or have an adjusted income of over £150,000 will be affected by the new 50:50 proposal. 

But BMA chair Dr Chaand Nagpaul argued this option will not prevent people from reducing their working hours.

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He said: ‘For many months, the BMA has been expressing concerns about the current pension taxation system, the unintended but serious consequences this is having on patient care and the wider NHS and so we welcome the fact that the DHSC and NHE England have today acknowledged the problem.

‘We welcome that in his announcement the secretary of state has stated that in addition to the 50:50 proposal in the interim Peoples Plan, he is willing to discuss with the BMA other models for pension flexibility in order mitigate the current disincentives for doctors to provide NHS services.’

He continued: ‘The BMA has already outlined a number of temporary mitigations which, if swiftly applied, would stop experienced doctors leaving the NHS or reducing the hours of patient care they provide and we are giving a cautious welcome to the fact this is a step in the right direction for reform. We have modelled the proposed 50:50 scheme and it is clear that by itself this proposal will not remove the disincentive for doctors to reduce their working hours. It needs to be part of wider reform. 

‘Given the complexities of the NHS pension scheme and the fact that individual circumstances vary, it is essential that any flexibility offers far more than simply paying half of the employee’s contribution in order for half the accrual of pension. In addition, there needs to be the ability to recycle the employer’s pension contribution on the percentage of pay that is no longer pensionable. This is commonplace in other sectors with the Chancellor describing such payments as ‘regular’.’ 

Health secretary Matt Hancock said: ‘We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.

‘The reforms we are setting out today will give clinicians greater flexibility to manage their pensions, have more control over their future, and offer a deal that’s fair to doctors, taxpayers, and the patients they care for.’

In January, Pulse revealed that health secretary Matt Hancock was in discussions with the Treasury over changing the tax treatment of pensions due to the effect on GP retention, saying it is the ‘biggest concern’ GPs raise with him

It emerged last month that there has been a ‘sharp rise’ in the number of GPs seeking pension advice, with some GPs facing personal bills of up to £50,000.

This came after research from Royal London revealed that doctors have resorted to a ‘hokey cokey’ approach to mitigate tax issues.