Government reveals pension changes but no change to tax allowances
No direct changes to either annual or lifetime allowance have been revealed in the government’s announcement on pension proposals today, despite these issues having previously been blamed for forcing clinicians to reduce hours or leave the health service.
The Department of Health and Social Care is due to launch a consultation on changes to the NHS pension scheme. This covers a number of changes trailed by Therese Coffey, the previous health and social care secretary, in September.
It also promises to grant “staff in primary care networks, such as GPs and staff in GP practices, access to the NHS pension scheme”.
The previously trailed changes are:
- An option of partial retirement for staff who wish to continue working, contributing to their pension but also draw part of their pension;
- Allowing staff who have retired or partially retired but wish to return to the service to rejoin the pension scheme and/or increase the hours they work without this affecting their pension; and
- Reviewing how rates of high inflation affect the annual allowance that scheme members can save each year before incurring tax – currently £40,000 per year.
However, the announcement contained no direct changes to either the annual allowance or the lifetime allowance. Because how much NHS pension scheme members contribute is directly linked to how much they work and earn, these rules have previously led to higher earners either incurring an exceptionally high tax charge or having to reduce their hours or leave the health service entirely.
Vishal Sharma, British Medical Association pensions committee chair, said today’s proposed changes were “too little, too late”.
He continued: “The partial retirement option and greater flexibility for recently retired doctors returning to the workforce have potential benefits and in particular will standardise retire and return arrangements – something the BMA has lobbied for. However, this does not directly address the issues caused by the annual or lifetime allowance.
“These are not just issues for doctors nearing retirement, but they are also increasingly influencing the decisions of mid-career consultants and GPs, for whom partial retirement would not be an option. These doctors will still have to consider reducing the work they do to prevent incurring large punitive tax bills and it is disingenuous of the government to suggest that this will make any meaningful difference to the huge backlogs in care we are seeing.”
The consultation is expected to run for eight weeks, and the proposals – if they go ahead – are expected to come into force in late spring 2023.
Announcing the consultation, health secretary Steve Barclay said: “We need a system where our most experienced clinicians don’t feel they have to reduce their workload or take early retirement because of financial worries. I also want to make it easier for staff that want to return to work to support the NHS to be able to do so without penalties.
“These proposed changes will help open up extra appointments so patients can see their GP and consultants more quickly. With record numbers of doctors and nurses working in the NHS alongside record funding, I’m focused on giving people the security of knowing the NHS will be there for them when they need it.”
The government previously suspended the so-called retire and return rules for pensions when the pandemic hit the NHS in March 2020, to make sure any clinicians who had retired or semi-retired could return to the health service without a knock-on detriment to their pension.
Most of these rules were due to come back into force in March 2023, although the government announced in early October it would be consulting on ways to make the NHS pension more flexible for those wishing to return to service.