Ministers are launching a review into controversial pension rules for high earners which are propelling thousands of doctors into early retirement.
They will examine the annual allowance tax charges which were introduced three years ago and affect anyone on salaries of more than £110,000 a year.
The Treasury has decided to review the pension rules following warnings they were penalising GPs and hospital consultants and encouraging them to cut back on their shifts.
‘We want to help our patients but we are financially penalised for doing so’: Anaesthetist Tom Dolphin, 40, slams the ‘pension tax’ which charges doctors for every extra shift – leading some doctors to retire at 50
Growing numbers of doctors in their 50s are choosing to retire altogether as their take-home pay has been so substantially reduced by the charges.
And many younger colleagues are cutting down on their shifts with the aim of reducing their salaries and thereby avoiding the tax penalties.
This is leaving GP surgeries and hospital wards severely understaffed and resulting in longer waiting times for patients, including for cancer scans.
Health secretary Matt Hancock supports the ‘extraordinary, life-saving work’ of the NHS and is pictured visiting Croydon University Hospital. He is adamant that doctors should not have to worry about the ‘tax impacts’ of going the ‘extra mile’ for patients
He is in full support of the new tax bill which will give doctors ‘pension flexibilities’ and make doctors pay more if they have a higher salary
The Treasury’s review is part of a major shake-up of doctors’ pension schemes announced by the Government today. This includes reforms from the Department of Health which would give doctors far more flexibility on the amount they pay into their pension pots each year.
Currently, doctors have to put 14 per cent of their salaries into their pensions annually. But the new system will enable them to pay in a much smaller amount and avoid the tax charges, taking the money as their salary instead.
Health Secretary Matt Hancock said: ‘NHS doctors do extraordinary, life-saving work every day and they should not have to worry about the tax impacts if they choose to go the extra mile by taking on additional work to help patients. These comprehensive proposals will give doctors the pension flexibilities they have called for and need to make sure they are rewarded for extra work.’
The pension taxes – known as the annual allowance taper – were introduced by former chancellor George Osborne in April 2016.
The rules are extremely complicated but, in short, anyone earning more than £110,000 a year will be hit with a tax bill depending on how much they put into their pension. The higher their salary and the more they pay into their pension, the heftier the tax bill. The Treasury stressed that the review will primarily focus on the impact on doctors and other public sector employees. But if they were to overhaul the system completely, then all high-earning workers would be affected, including those in the private sector.
Only two weeks ago, Mr Hancock launched a consultation into doctors’ pensions which proposed allowing them to halve the amount they paid into their pots.
But this was heavily criticised by the British Medical Association (BMA) and other health bodies which warned that this alone would not help doctors avoid the charges.
Dr Chaand Nagpaul, from the BMA’s council, said: ‘After a year’s tireless lobbying by the BMA on the damaging and perverse effect that this legislation is having on our NHS, its doctors and patients, it is good to see the Government finally… taking notice.
‘The BMA will be glad to work with the Chancellor and the Health Secretary to guarantee changes that will solve the problem for all doctors.’
He claims he has seen a growing number of cancellations in surgical operation as a result of George Osborne’s 14 per cent ‘annual allowance taper’. The consultant, who works at a hospital in West London, is one of thousands of doctors to have cut back on their hours
Anesthetist Tom Dolphin has seen dozens of operations cancelled because of the mounting pensions crisis.
The consultant, 40, who works at a hospital in west London, is one of thousands of doctors to have cut back on their hours. He has reduced the number of days he works by about three a month.
Mr Dolphin, who earns about £85,000 a year, said: ‘As doctors, we want to help our patients but we are being financially penalised for doing so.
‘Doing one extra shift can get you a £5,000 tax bill. The NHS system relies on doctors working overtime.
‘The issue has come to a head in the past couple of months and it will only get worse over winter. We’re starting to see patients having their operations cancelled and postponed.’