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BMA calls on next PM to address ‘perverse impact’ of pension tax rules

The BMA has called on the next prime minister to urgently solve the pension tax crisis. 

In letters sent to Conservative leadership hopefuls Jeremy Hunt and Boris Johnson, BMA chair Dr Chaand Nagpaul said it is crucial the Government puts in place swift measures to tackle the ‘perverse impact’ pension tax rules are having on doctors and patients.

It comes after health secretary Matt Hancock announced a review to make pensions ‘more flexible’ for GPs in a bid to address retention issues

But the BMA warned that this solution is not enough, saying it will lead to more doctors, including GPs, retiring early. Instead, it urged the Government to scrap the annual allowance and tapered annual allowance and reform the lifetime allowance to ‘stabilise the workforce’.

Under the current NHS pension scheme, the highest earning GPs 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. 

A recent Pulse investigation found that more than 50% of GPs plan to stop practising before retirement age for reasons including problems with pensions.

Dr Nagpaul said the BMA is ‘deeply concerned about significant reductions in capacity within the NHS’ caused by the existing NHS pension taxation system.

He wrote: ‘In addition to the problems created by the lifetime allowance, the current workforce issues in the NHS are exacerbated by problems with the annual allowance and tapered annual allowance.

‘We ask you to extend your commitment to reform the lifetime allowance to also address the perverse impact caused by the annual allowance and the tapered annual allowance should you become the next Prime Minister.’

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. 

Dr Nagpaul suggested both leaders to consider the ability to recycle the employer’s pension contribution on the percentage of pay that is no longer pensionable.

He said: ‘We believe that the only long-term solution to address this adverse impact on workforce capacity is to remove the annual allowance and tapered annual allowance in defined benefit schemes such as the NHS pension scheme.

‘However, recognising the urgency of the situation the BMA has been suggesting for many months that mitigations need to be implemented swiftly in order to stabilise the workforce.

‘Crucial to this is the recycling of the employer pension contribution back to the employee if they have been forced to leave the scheme by this punitive tax. Recycling of the employer pension contribution on any part of pay that was previously pensionable is also essential for any new flexible ‘partial pension’ option to have any chance of stabilising the situation.’