£2billion injection to cure NHS doctors’ pension tax headache

THE Chancellor yesterday put aside more than £2billion to remedy the pension tax trap hitting top doctors in the NHS.

Complicated rules have meant highearning staff have had to turn down extra shifts and even retire early to avoid unpredictable and punitive bills – some in excess of £100,000.

Rishi Sunak yesterday announced that all workers would be allowed to earn an extra £90,000 before the tax rules kick in – sparing 98 per cent of consultants and 96 per cent of GPs from the shock bills.

The move, which will cost the Government more than £2billion over the next five years, comes at a time when coronavirus is threatening to plunge the NHS into crisis. However, experts and accountants last night warned the measures did not go far enough and claimed the Treasury had missed a chance to scrap the complicated system altogether. Currently, those earning a penny more than £110,000 trigger a taper that eats away at their £40,000 annual pension savings allowance.

Now, as of next month, the taper allowance will only kick in once someone earns £200,000.

The tax rule has hit NHS doctors hard because they are in a final salary pension schemes. This means any pay rises inflate the value of their pension pots.

Former pensions minister Steve Webb, who is now a partner at the LCP consultancy, said the Government should have gone further.

He said: ‘The system of pension tax relief is far too complicated and this is a missed opportunity to make the system simpler and clearer.

‘Although most doctors will now be excluded from the tapered annual allowance, it would have sent a much clearer message to abolish the taper altogether.’ A British Medical Association survey of 4,000 consultants

‘Solution is long overdue’

previously found 30 per cent planned to cut back hours and 60 per cent intended to retire early because of the pensions issue.

Dr Vishal Sharma, chairman of the BMA pension committee, welcomed the Budget and said the vast majority of doctors would now no longer be ‘paying to go to work’.

Dr Sharma insisted: ‘This solution is long overdue. For the past 18 months patients have suffered and doctors have faced an intolerable dilemma with many forced to cut short their service to the NHS – reducing hours or turning down vital additional work.’

He said this had resulted in medics ‘not being able to care for their patients as they would want to’.

However, industry experts warned the Chancellor had not fixed the problem and the threat of a shock tax bill still remained.

Baroness (Ros) Altmann, a former pensions minister, said: ‘Top consultants will still not know whether they will be penalised due to pension rules. This uncertainty remains and will keep damaging NHS services.’ The Treasury also yesterday increased the pension saving lifetime allowance from £ 1,055,000 to £1,073,100.

Many industry experts had feared before the Budget that Mr Sunak would axe the 40 per cent pension tax relief enjoyed by high earners.