Give doctors tax holiday on pensions to lure them back to work, say experts
NHS waiting lists will be brought under control only if ‘nonsensical’ rules on doctors’ pensions are axed, it was claimed last night.
The tax regulations – which can mean huge bills for those taking on extra NHS work – are a major disincentive for medics to help.
With 6.36million people on waiting lists and record numbers waiting more than a year for treatment, the need for doctors is grave.
But last night, two former Pensions Ministers and a tax consultant said ‘labyrinthine’ rules about how they were taxed made many turn down extra work. Tory peer Baroness Altmann said: ‘Pensions are meant to be a reward for work. But these complicated, and in my view nonsensical, tax rules have turned them into a penalty for work.’
Sir Steve Webb, a Pensions Minister in David Cameron’s Coalition, said doctors shouldn’t have to worry about ‘the tax implications of doing extra hours’, adding: ‘It’s a nonsense that we are in this situation.’
Peter Herniman, of Ballards accountants and tax advisers, said: ‘We deal with approximately 350 medical consultants. Over 50 per cent have turned down extra NHS work because of this.’ He cited a consultant surgeon who declined extra NHS shifts worth £10,000 a year because it would raise her total annual tax bill by £14,000, leaving her £4,000 out of pocket.
If a doctor’s NHS pension increases by more than £40,000 in a year – an amount called the annual allowance – it could trigger a one-off tax charge of up to 45 per cent on the excess.
The longer a doctor has worked for the NHS and the bigger their salary, the more likely it is that a fairly modest pay rise will result in their pension growing by more than £40,000 in a single year – meaning senior doctors are most likely to be hit with the charge.
Plastic surgeon Mark Henley, president of the Confederation of British Surgery, urged the Government to ‘tackle punitive pensions taxes’, adding: ‘Many medics would welcome the
‘It’s a nonsense that we are in this situation’
opportunity to use their expertise to help tackle the NHS workforce crisis. However, the tax situation is economically unsound, as doctors could lose thousands of pounds by staying longer in work, taking extra shifts or agreeing to come out of retirement.’
Baroness Altmann and Sir Steve said short-term options, such as waiving the annual allowance charge, would encourage more to do extra work. But doctors’ public-sector pensions are more generous than most private-sector ones, so relaxing tax rules for doctors would widen this gap. But Baroness Altmann said cutting waiting lists was ‘the most pressing problem’.
An additional problem is that doctors are retiring early when they hit their lifetime tax limit on pensions, above which they are taxed heavily.
The Department of Health and Social Care said generous NHS pensions and well-remunerated careers ‘mean some senior doctors exceed their allowances for tax-free pension saving’.