Hancock promises permanent pensions solution

Some senior clinicians face four-, five- or six-figure tax bills, according to the British Medical Association. This is due to rules on tax relief on pension contributions that include a taper on annual allowances for incomes above £110,000. Senior NHS managers have
also been affected, though there are no current plans for them to be covered by new proposals.

In December, health and social care secretary Matt Hancock said he was targeting a long-term solution. ‘We’ve already agreed a short-term solution for this winter, but we’re launching an urgent review of the annual allowance taper so we can fix it permanently and give clinicians the confidence to do their jobs in the knowledge they will be fairly rewarded,’ he said.

In January, there were reports that the Treasury is considering increasing the income threshold at which the taper applies to £150,000. But the BMA insisted raising the threshold would not fix the problem.

BMA pensions committee chair Vishal Sharma said: ‘The annual allowance is completely unsuitable for defined benefit schemes. Simply raising the threshold income would not remove any of the complexity of the taper, nor the threat of doctors facing a “tax cliff” when their income increases.

‘And due to the complexity of the way pension growth is calculated, with a final figure only known at the end of the tax year, even those who earn well below this increased threshold would still likely limit their work to ensure they’re not hit with unexpected charges.’

In the short term, NHS England and NHS Improvement have moved to ease clinicians’ fear of taking on extra work this winter – clinicians will pay any tax liability using funds from their pension pot and the NHS will be legally bound to cover any resulting shortfall in pension on retirement.

NHS England and NHS Improvement chief financial officer Julian Kelly said the arrangements will incur no extra costs for the employer. Mr Hancock confirmed the commitment will be honoured when the affected clinicians retire.