Pension allowance freeze ‘will push doctors to retire early’

A surge in the number of doctors available to do private practice in the UK could be on the way if the Chancellor presses ahead with a freeze on the pension ‘lifetime allowance’ in tomorrow’s Budget.

The measure has been predicted in recent media reports and the BMA is so concerned about its possibility that it wants an urgent joint meeting with Chancellor Rishi Sunak and Health Secretary Matt Hancock.

Dr Vishal Sharma © BMA

Dr Vish Sharma, BMA pensions committee chairman, warned them in letters: ‘We are deeply concerned that if you press ahead with this policy, this will result in large numbers of doctors retiring early or working less than full time at the very time patients will need them the most.’

Freezing the lifetime allowance would hit many senior doctors with punitive high tax rates from an even younger age.

Dr Sharma wrote that removing the lifetime allowance from indexation could have a profound and unforeseen impact on doctors working in the NHS. 

A BMA member survey of 6,170 hospital doctors and GPs in 2019 found that 31% reduced their hours due solely to pension tax charges, and 57% were considering retiring early. 

Dr Sharma said: ‘We are also aware through our regular surveying that this is a long-standing problem which is worsening over time. Given that doctors are certainly the largest group in the public sector affected by pensions taxation, coupled with the fact they also have the least amount of flexibility to mitigate these pension taxes, their only real option is to reduce their working hours or retire early.’

He added: ‘Any further detriment to the lifetime allowance, such as that reported in the media, could lead to a catastrophic exacerbation of this already precarious workforce situation. 

‘We are especially concerned given the impacts of Covid-19 and the absolute necessity to maintain as many doctors in the workforce as possible.’

Patrick Convey, technical director at specialist financial advisers Cavendish Medical, said: ‘Doctors have faced some of their toughest challenges in the last 12 months, working extraordinarily hard in very difficult circumstances. Not only have the Government continued to tinker with the annual allowance rules during this period but now they may also remove the inflationary lifetime allowance increase.

‘This will mean more people are dragged in to paying lifetime allowance tax when they come to draw their benefits and it needlessly adds more complexity to an already complicated issue.’