Trust’s pension fix refusal risks wave of doctor resignations

A ‘significant flurry’ of senior doctors will look to retire after a trust rejected a scheme designed to avoid higher taxes on their pensions, according to internal emails.

Emails from senior doctors suggest Liverpool University Hospitals Foundation Trust has rejected proposals to introduce “pension recycling”, a scheme endorsed nationally to avoid the tax rules.

Government policy changes in 2016 reduced tax relief on higher earners’ pension contributions. This has discouraged clinical consultants from taking on extra shifts, and in some cases, prompted people to retire earlier than planned.

Last month, NHS England’s chief executive Amanda Pritchard suggested this was a continuing problem for hospitals as they seek to increase elective activity.

Trusts have since deployed various workarounds to mitigate the policy, including a solution where the employee leaves the pension scheme and is given additional salary in place of the employer’s normal pension contribution. This approach is known as pension recycling and was endorsed by NHSE in 2019.

A well-placed source who has worked with trusts on such schemes suggested around a quarter have implemented pension recycling to date.

But emails from senior medics at LUHFT at the end of March, seen by HSJ, suggest the trust has declined to implement the scheme, due to legal considerations.

In one email, Patrick Magennis, chair of the British Medical Association’s local negotiating committee, wrote to colleagues: “The LNC has found out today that [the trust’s] executive last week rejected proposals to introduce a pension recycling policy.

“They say that this decision is not ‘full and final’… [but] we are pessimistic that a change in approach will be forthcoming in the short to medium term.”

In guidance to trusts, NHS Employers warned of some legal risks around the scheme, such as equality laws and auto-enrolment duties, but also explained how these can be mitigated.

In another email, the LNC’s deputy chair Vishal Sharma wrote to the trust’s deputy people director Elaine Butchard, highlighting that various national bodies had endorsed pension recycling.

He added: “Elaine, if I understand your email correctly, the principal reason you state for not offering this relates to the legal risk of implementing such a scheme?

“…Once [consultants] sit down with a financial adviser, they will soon realise that they are financially disadvantaging themselves by continuing to pay into the [pension] scheme and in the absence of a recycling policy will need to retire.

“In addition to the 20 - 30 consultants that have already directly contacted myself or Patrick asking about recycling… I have been inundated by people contacting me and I have had to direct a number of them to financial advice as it was pretty clear that (in the absence of a recycling policy) they need to retire.

“There is likely to be a significant flurry of people submitting paperwork to retire over the next few months.”

Mr Sharma suggested the issue should be placed on the trust’s formal risk register.

The source who has worked with trusts suggested a common reason for not implementing pension recycling was a concern around fairness, as staff on lower salaries who are unaffected by the tax changes could claim they should be allowed to receive pension contributions as additional salary as well.

LUHFT said discussions are ongoing and it was still assessing the scheme’s benefits, but did not wish to comment further.

The key changes to the tax rules in 2016 were a reduction in the annual tax free allowance for those earning more than £110,000, and additional tax charges for those whose total lifetime pension pots exceeded £1m. The thresholds have since been raised, meaning fewer consultants and other senior staff being impacted, but still appear to be causing significant concern.