Wesleyan is calling for immediate action from the government to implement its new proposed changes to NHS pension rules, as it releases new research highlighting the impact punitive pension taxation is having on the NHS workforce.
In her Plan for Patients, Health Secretary Dr Thérèse Coffey said she would ‘change’ elements of the NHS pension scheme to help retain doctors, nurses and senior NHS staff, and increase capacity.
This includes amending the revaluation date in the NHS Pension Scheme to reduce the risk of NHS staff facing annual allowance (AA) charges as a result of rapidly rising inflation.
A new survey*, conducted by Wesleyan, shows just how urgent it is for this pledged action to be taken soon.
Nearly a third (30%) of medical professionals it surveyed said they had, or planned to, reduce their hours to minimise the risk of receiving an annual allowance or lifetime allowance tax charge.
A fifth (20%) had or planned to leave the NHS pension scheme permanently in a bid to avoid tax charges, while a further fifth (19%) had or planned to strategically leave and re-join the scheme in an attempt to limit their pension growth.
Concerningly, more than a quarter (29%) of medical professionals surveyed – including senior hospital consultants and GPs – plan to retire within the coming year.
Of those retiring earlier than planned, one in six (14%) said it was because they had hit their lifetime allowance (LTA) on pension savings.
Alec Collie, Head of Medical at the Wesleyan Group, said: “Pension tax has been a problem for our health service for far too long.
“We currently have a perverse situation where, by continuing to go above and beyond for their patients, some of our most senior and experienced clinicians risk receiving what can be eye-watering tax bills – bills so large that we know of cases where doctors have actually had to take on significant debts to pay them.
“It is good to see the government acknowledge the importance of fixing pension problems in supporting the NHS workforce. But, as these results show, time is of the essence.
“We’ve seen government intention. We now need to see action, with a clear timetable for these changes.
“As well as addressing inflation-linking issues in pensions, the government also committed to making NHS Trusts offer ‘pension recycling’.
“While this can help some doctors manage their risk of receiving expensive pension tax bills, it doesn’t – in its current form – help GPs. It also requires doctors to opt out of the NHS Pension Scheme – something we always urge caution around.
“Leaving the NHS Pension Scheme could mean doctors end up with a diminished pension pot on retirement, and lose valuable benefits that the NHS Pension Scheme brings – such as the ‘death in service’ gratuity, which pays a lump sum to their families and dependents if they pass away.”
As part of the Plan for Patients, the government stated that it would introduce new retirement flexibilities in pension rules – including the option for staff to take partial retirement to draw on their pension while continuing to build their retirement benefits, and working more flexibly.
It also pledged to extend temporary easing of ‘retire and return’ rules – which otherwise reduce or suspend pension benefits of retired or partially retired staff who return to work – until 31 March 2025.
Wesleyan’s research found that two-fifths (41%) of doctors planned to continue working in some form after they started taking their pension benefits, with many continuing to do NHS work.
Of those continuing to work, two-fifths (43%) will work in the health service, with a further one in five (19%) doing a mix of private and NHS roles.
Alec Collie added: “Changing the ‘retire and return’ rules could make it easier for retired clinicians to return to work without suffering pension penalties. But we’ll need to see more details, again sooner rather than later, on how the plans will work to know if it will be effective in practice.
“For anyone concerned about the risk of receiving a tax charge, or questioning how they should proceed with their NHS pension or plans to continue working after they retire, speak to a specialist financial adviser. They can help you understand exactly what the implications are for your specific circumstances and determine the best path forward.”