Lack of flexibility in the current NHS pension system has created an incentive for swathes of GPs to cut their hours, the Government has said as it launches a review of the system.
The Department of Health and Social Care (DHSC) admitted that a third of GPs and consultants could be incentivised to refuse to take on extra shifts in a bid to avoid current pension tax charges.
Currently there is no flexibility in the amount of money NHS employees contribute towards their pension – with the highest earners being required to pay at least 14.5% of their salary.
In a consultation due to be launched today, the DHSC will set out the details of new proposals allowing doctors, including GPs, to control their pension contributions and avoid ‘significant pension tax bills’ that are issued once tax relief limits are breached.
The measures include:
- Being able to choose a personalised pension growth level at the start of each tax year (1 April) and pay correspondingly lower contributions. The level chosen would be a percentage of the normal scheme contribution in 10% increments. For example, 50%, 30%, or 70% of the full accrual level.
- Having the option to fine-tune their pension growth towards the end of the tax year when they are clearer on total earnings. This will allow them to ‘top-up’ their pension pot to the maximum amount without hitting their tapered annual allowance limit.
- Where an individual has a large increase in pensionable pay, phasing over a number of years the amount by which the new pay level contributes towards their pension. This smooths any spike in pension growth that can cause sudden pensions tax charges
Today’s proposals replace previous Government plans to introduce a 50:50 scheme in which doctors would have been able to halve their pension contributions and get half the rate of pension growth in return.
Those plans were scrapped in favour of providing more flexibility in the level of pension contribution doctors can make – and also offering the possibility for employers to ‘recycle’ their contributions into the overall salary
Health and social care secretary Matt Hancock said today: ‘I love the NHS – and our new plan means every senior clinician will be able to carry out life-saving work for patients safe in the knowledge they have more control over their pension, their future and their retirement than at any other point in NHS history.
‘Today we’re taking a decisive step in fixing this issue for good so patients can feel the impact in GP surgeries and hospitals across England and we are already helping hospitals ease the immediate burden with new advice on action which can be taken now.
‘To make sure we get this right, however, it is vital we learn from the experiences of our dedicated frontline staff, so I urge them to have their say.’
Health minister Chris Skidmore said: ‘Nobody working for our NHS deserves to be penalised for caring for their patients or going above and beyond to provide out-of-hours care.
‘We have listened to the concerns of our top clinicians and are taking decisive action today by empowering GPs, consultants and top nurses with newfound flexibility to balance their pensions with the demands of their vital front-line work.’
This article has been updated to reflect that GPs and consultants may be incentivised to not take on extra shifts by current pension rules, rather than have already refused extra work.