BMA launches pensions tool for GPs to help navigate unfair inflation calculations

by BMA media team

Press release from the BMA

Location: UK
Last reviewed: 21 May 2022
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The BMA today launches a tool1 for GPs to give them clarity over the way changes in inflation and the unfair way these are used in calculations around their pensions leaves them liable for potentially significant tax charges.

Charges for exceeding the tax-free annual allowance (AA) are based on deemed pension growth – not contributions.

Only growth above inflation should be tested against the annual allowance but because of the anomalous use of two different values of inflation in the calculations, the dramatic rise in CPI over the last year could severely impact doctors, in particular GPs – leaving them facing significant AA charges2.

Meanwhile, if inflation stabilises next year as predicted, those who have already faced these unfair penalties this year that were based on “artificial” pension growth will see this growth largely disappear and hence will have been taxed in a benefit that they will never actually receive.

NHS Employers has said it is building a tool to estimate GP pension growth for release later this year. However, given the rapid rise in inflation – announced at 9% on Wednesday – the BMA has launched its own tool to highlight the perverse way AA charges are calculated, and allow individual GPs to plan accordingly.

In an April survey3 from the BMA around two-thirds of GP respondents said the financial impact of pension taxation would influence their thoughts about leaving the health service. With England alone having lost the equivalent of more than 1,500 full-time fully qualified GPs since 2015, the BMA says it is vital that the Government acts to reform these damaging pension rules that threaten to vastly exacerbate the workforce crisis, leaving even fewer GPs to care for patients.

Dr Vishal Sharma, BMA pensions committee chair, said:

“Punitive pension tax rules that leave senior doctors facing large and unexpected penalties for staying in work, are a huge disincentive for them to continue in the NHS, providing much-needed care for patients, even if they want to.

“And the system is not only unfair, but incredibly complex, meaning doctors will not realise they have a large bill coming their way until they receive it. This creates a great deal of uncertainty and anxiety for hard-working doctors when they are already dealing with unprecedented pressures.

“With current rises in inflation, this can result in further punitive tax charges. We have released this tool for GPs so that they can have as clear a picture as possible and make informed decisions for the future.

“We cannot tell doctors what these decisions should be, and some may well continue to work regardless of the impact on their pensions. However, with a long-standing GP workforce crisis, the Government must urgently act to prevent hard-working doctors from taking what they might feel is the only option of either reducing their hours or retiring entirely to prevent being unfairly penalised for their dedication to the health service and their patients.”


Notes to editors

  1. More information on the tool is available here.
  2. Pension growth should only be based on growth that is above inflation. However, due to anomalies in the Finance Act, the pension can only increase by inflation as measured in the September preceding the relevant tax year (3.1% in September 2021) before testing against the Annual Allowance. But the pension is increased by the inflation as measured in September of the tax year (ie September 2022). Given the rapid rise in inflation – with the Bank of England predicting it to rise to 10% this year - this means that GPs will face significant AA tax charges simply as a result of these two different measures of inflation being used. Worst of all, assuming inflation falls again next year, the value of the GP’s 1995 pension will fall in real terms but this fall in pension growth in the 1995 scheme cannot be offset against any pension growth in the 2015 scheme. The net effect of this is that many GPs will incur annual allowance tax charges of tens of thousands of pounds on ‘artificial’ pension growth that they will never actually receive.
  3. Respondents were asked “How if at all might any of the following influence your thoughts about leaving the health service?”. Of those GPs who responded (383), 43% said it would be a high influence and 25% said it would be a medium influence.
  4. The BMA has suggested a number of solutions to Government, including:
  • Making a small alteration to the Finance Act so only real growth above inflation is measured
  • Resolving a very important technical issue around “Negative Pension Input Amount (PIA)”
  • An AA compensation scheme – a replica of the 2019/20 scheme when unfair punitive AA charges were settled via a Government-run scheme
  • A long-term tax unregistered scheme – similar to the scheme recently established for judges. This would mean doctors could carry on working as many sessions as they wish for as long as they would like to without having to worry about falling foul of complex pension taxation problems and administration.

The BMA is a professional association and trade union representing and negotiating on behalf of all doctors in the UK. A leading voice advocating for outstanding health care and a healthy population. An association providing members with excellent individual services and support throughout their lives.