A Government minister has said it would be ‘hard to justify’ another GP pensions tax compensation scheme like the one implemented in 2019/20.
The economic secretary to the Treasury also suggested that discrepancies in inflation calculations that could see the average GP hit by a £33k tax bill should not be changed because they benefit other groups, although he admitted they could cause more GPs to face tax charges.
Richard Fuller made the comments at a House of Commons debate on NHS pensions held on Wednesday evening, where MPs heard that pensions have hit a ‘crisis point’.
Conservative MP for Central Suffolk and North Ipswich and hospital doctor Dr Dan Poulter, who called the debate, told MPs that ‘pension penalties’ must be ‘looked at urgently’ as losing ‘senior and experienced’ GPs at this time would be an ‘unmitigated disaster’ for the NHS.
He said that a combination of stress and burnout, the freezing of the lifetime allowance in 2021 and the rapid rise in inflation means that ‘the situation has reached a crisis point’.
Dr Poulter called for a tax unregistered scheme to be implemented for senior doctors, amendments to the Finance Act to fix inflationary discrepancies and a 2022/23 repeat of the 2019/20 compensation scheme that protected clinicians from significant tax penalties on their pension growth.
Under the special arrangement for 2019/20, members of the NHS pension scheme could elect for the scheme to pay the pension annual allowance tax charge for 2019/20 on their behalf and will then be compensated for the effect of the deduction on their pension income when they retire.
However, Mr Fuller said: ‘I know that the BMA and others have said that the action taken at Budget 2020 on the tapered annual allowance was not enough.
‘However, the cost of this intervention was £2.2 billion over five years, and it was targeted at the very highest earners in society.’
He added: ‘It will be hard to justify focusing more Government support on them, especially in the current climate. This includes replicating the temporary scheme used in the 2019-20 tax year.’
However, director general for NHS policy and performance at the Department of Health and Social Care (DHSC) Matthew Style had this week suggested that measures such as those put in place in 2019/20 were ‘under active consideration’.
Speaking at the final hearing in the House of Commons health and social care committee inquiry into the future of general practice, he said pensions issues were ‘very actively under review’ and the DHSC is ‘listening to proposals both employers and workforce representatives will make to us and discussing those across Government’.
He referred to the Government’s ‘track record in terms of acting decisively on this’ and pointed to ‘some very particular steps in 2019/20 to alleviate this issue’, saying this was ‘under active consideration’.
Although he acknowledged that ‘tax policy and pensions tax policy is of course a matter for the Chancellor and not for me’.
And while Mr Fuller conceded in Wednesday’s debate that the spike in inflation ‘has laid bare some of the problems’ in the way that NHS pensions calculations are made, the current system should remain in place because it benefits some groups.
He said that it ‘may cause more members to exceed the annual allowance and cause those who already routinely exceed it to exceed it by more, with the result that some may receive annual allowance tax charges’.
But he added that the approach ‘provides certainty to individuals at the start of the tax year about what their opening pension value will be for annual allowance purposes’.
He said: ‘I appreciate that, for those with a defined benefit pension alone, this certainty may not be seen as much of an advantage.
‘However, for others across the country who may have some defined benefit accrual but are now saving into a far less generous defined contribution scheme, this certainty allows them to plan their finances and pension contributions for the coming year.’
Mr Fuller also suggested that a tax unregistered scheme would not be appropriate for NHS pensions as ‘a distinction remains to be drawn between NHS high earners and the judiciary’, where there are ‘unique circumstances’.
He reiterated that the NHS pensions scheme is ‘one of the most generous pension schemes available’ but added that he recognises there are ‘significant issues’ around GP retention.
He said: ‘We all recognise that there are significant issues around doctor and GP retention and the points raised this evening have struck a chord with me. I look forward to discussing them further with honourable members.’
Dr Poulter told MPs that GPs aged 59 or 60 could lose ‘over £100,000 from their pension pot if they delay retirement by one year’ and pointed to a Pulse survey that last month revealed almost half of the existing GP workforce plans to retire at or before 60.
He added that 55% of GP retirement in 2020 were ‘voluntary early retirement’.
He said: ‘Senior and experienced NHS workers are not asking for special treatment. They are, however, asking for a fair system
‘If the Government are serious about valuing NHS staff, if the Government are serious about helping healthcare staff to meet the covid care backlog, and if the Government are serious about meeting the needs of patients, they must act now to reform NHS pension rules.’
Earlier this month, a letter to specialist GP accountants from the Treasury said it was ‘not minded’ to replicate the 2019/20 tax compensation scheme ‘at present’.
READERS' COMMENTS [12]
Please note, only GPs are permitted to add comments to articles
I am not minded to continue working as it doesn’t pay due to unpredictable uncontrollable and once done unavoidable tax charges. If he thinks that the system allows planning for those involved he has demonstrated his lack of understanding of the macchiavellian system of AA calculation in the NHS that feels deliberately designed to penalise people on Dr level incomes. How you can be taxed on inflation as many GP’s will be this year and over which we cannot control or predict is mad. It would be simpler to have AA for defined contribution schemes and LTA for defined benefit. I suspect the loss to the treasury of NHS pension contributions outweighs the tax gained.
I don’t understand why
1. the judges have been treated very differently from us
2. why we are compelled to pay real money as tax on entirely imaginary sums of money that we can’t access in the real world. if we could pay imaginary money from the imaginary increases (rather than real money now or out of our eventual pensions) that would be fine.
You have hit the nail firmly on the head with your comment David. This his a willful strategy by the government to obtain a real-money AA subsidy from doctors now and the hope that we don’t live long enough to benefit from the imaginary uplift in payable pension. The scheme should become tax unregistered and the contributions rates accordingly reduced. The only reason not to do this is will eliminate the AA income stream at a stroke.
They are telling you what they will do.
In 10 years time when the government is even more broke will there be any incentive for a ponzi scheme NHS pension to be continued? There is no investment scheme for this pension, only payments from current staff. The government see it as a ‘benefit’ and as such it is easier to slash the pension of one GP rather than 10 HCAs, for example.
I don’t trust the NHS scheme to pay out at the promised rate in 20 years.
Nice one Simon, fortunately taken my pension and working on basis will be too addled to worry in 20 years time.
Was led to believe absolute best best pension scheme was for MP’s Funny that?
WHAT IS “HARD TO JUSTIFY” IS SOCIETY ALLOWING THOSE WITH A REMEDIAL KNOWLEDGE OF HEALTHCARE TO BE MAKING DECISIONS WHICH MASSIVELY IMPACT SOCIETY……..IF WE CONTINUE TO ALLOW “FOOLS” TO RUN THE SHOW THERE WILL BE NO GPs AND NO NHS……..THE GENERAL PUBLIC NEED TO RISE UP AND DEMAND CHANGE FROM THESE CLOWNS……..
@Darren Tymans – for what it is worth people can elect to do scheme pays and then pay their bills through the imaginary money as such.
It will have a fairly negative effect on your final pension though.
Smoke and mirrors to con you of your money. I have stopped it. A bird in hand is better than 2 in the government’s bush.
Stop contributing, and pull your work and do what you want to do when you breach the lifetime allowance, continue exiting GP land.
Any policy decision is a little pointless whilst the NHS pension scheme is in the hands of a for profit organisation that is allowed to extend its contract even when tens of thousands of those close to or at retirement cannot obtain a clear and correct estimate of their pension.
My mother – a retired nurse has just died. We contacted NHS pensions with all the correct paperwork to let them know and recieved a reply telling us the details of a deceased man 100s of miles away…. You would not believe it in a novel.
Jp Fisher
why don’t you copy all the documents and contact your MP ? the summer “holiday” for MP’s is coming up – they must have some spare time to look at this (unlike us GP’s who are still fighting covid, heatwave, inflation, ukrainian war, cost of living crisis etc etc etc – all of which we, apparently, are responsible for). or, better still, contact the media.
I’ve stopped my pesion contributions this year, which should balance out what I have to pay in tax for the inevitable AA breach, and shall be retiring as a GP principal next year at the age of 55 to avoid the inevitable LTA breach. So they won’t get a penny more out of me. Of course it is ‘hard to justify’ taking action which would result in the retention of experienced GPs like me ‘in the current climate.’