Doctors’ bodies unite to call for pension reform

Leading medical bodies have joined to call for reformation of the pension tax system which is robbing many consultants of tens of thousands of pounds.

In an appeal to the Government, as part of an effort to prevent mounting early retirements of consultants, they call for the punitive charges to be sorted in the next Budget and for an end to NHS Pension Scheme complexities, which hamper doctors’ financial and retirement planning.

This week’s report is a result of a collaboration between seven medical royal colleges, the Faculty of Intensive Medicine and the BMA.

It warns that despite pension taxation reforms earlier this year, many doctors earning less than the new £200,000 threshold income still face additional tax bills due to exceeding the standard annual allowance, which is ‘unsuited’ for defined benefit pension schemes such as the one offered by the NHS. 

Even a most modest rise in pensionable pay can result in a tax bill. 

The last Budget also made no change to the lifetime allowance for pensions, meaning many doctors will still need to consider taking early retirement as a result. 

Huge’ charges for older consultants

Doctors’ organisations warn that members are taking a risk-adverse approach and quitting the pension scheme to avoid punitive taxation charges. 

They say: ‘Furthermore, those doctors who are members of the 1995 legacy scheme and the 2015 reformed scheme are unable to draw their 1995 pension while continuing to pay contributions into the 2015 scheme.

‘This puts pressure on members in the 1995 scheme to retire at the age of 60 rather than continuing to work longer. We also believe that the strict abatement rules that then limit the amount of work doctors can do when they return to NHS employment after retirement should be reviewed. Part-time consultants must not pay pension contributions at the full-time equivalent rate either. 

‘Many consultants have received huge additional taxation charges as a result of annual and lifetime allowance breaches. There are sound reasons, however, for offering full employer contributions to employees who are forced to either leave the NHS Pension Scheme or face very large additional tax bills. A large proportion of the likely recipients of additional charges are older consultants. 

‘These older consultants are also at risk of breaching the lifetime allowance. For many, they may be able to choose between staying in employment or retirement. Even where they opt to retire and return to work, it is likely that the employer would have been able to access a greater amount of working time from that consultant if they could have been persuaded not to retire.’

The reports states that when consultants are forced to leave the pension scheme and continue to work, they are effectively doing the same work when compared to a colleague who has been able to remain in the scheme but for 20.6% less reward – that is to say, a reduction in the total reward package equivalent to the value of the employer pension contribution.