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Many of you will be in the process of collecting the information required to complete your tax returns for the 2018/19 financial year and will be dismayed to learn that you face a significant additional tax bill for exceeding your annual allowance.
You are certainly not alone – we know that one third of consultants found themselves in this situation last year and the number of people affected continues to increase. These bills can be crippling and doctors have been trapped by these ill-conceived taxes that were originally designed to prevent tax avoidance in the private sector.
The BMA remains clear that the only long-term solution to the pension taxation crisis is to fix this problem at source by undertaking fundamental pension taxation reform. The annual allowance is completely unsuited to defined-benefit schemes as members cannot control their pension growth and as such the BMA believes the best long-term solution is to scrap the annual allowance completely in defined benefit schemes such as the NHS.
This would of course also remove the ill-conceived 'taper' in these schemes, which is driving so many of the problems. The Government has advocated that the annual allowance is required to ‘limit’ tax relief. While this may be true in defined contribution schemes (where you can choose how much you pay into your pension), this is certainly not the case in the NHS pension scheme. Not only can you not control your pension growth, other than reducing your work or opting out of the pension scheme but tax relief is already limited by the lifetime allowance.
In addition, the benefits of higher-rate tax relief are significantly offset by the tiered employee contribution rates in a career-averaged pension scheme. The annual allowance can also have a significant impact on those who take career breaks or spend long periods working part-time, as these individuals can have rapid pay progression later in their career. This is an important consideration in addressing the current significant gender pensions gap.
The Office for Tax Simplification, an independent body that advises HM Treasury, agrees with the BMA about the unsuitability of the annual allowance in defined-benefit schemes. They comment that not only is it unnecessary to have an annual allowance and a lifetime allowance but that one solution would be to have no annual allowance but maintain the lifetime allowance in defined-benefit schemes and have an annual allowance but no lifetime allowance in defined contribution schemes.
We have continued to engage with MPs about the importance of pension tax reform and will lobby extensively with the next government to ensure this is achieved. You will no doubt be aware of the NHS England and Improvement proposal to pay annual allowance tax bills for doctors in England that incur an annual allowance tax charge. While this may provide important relief for some doctors, the BMA and NHS England and Improvement are clear that this is only an emergency mitigation and must be accompanied by long-term pension taxation reform.
It is essential that this tax reform works for all doctors and NHS staff including medical academics, public health doctors, the armed forces and non-clinical staff.
You may also be aware of the legal case brought by the firefighters and judges regarding the 2015 pensions scheme changes. The BMA has been monitoring this carefully and has already brought claims, on behalf of its members, against the health secretary in relation to the 2015 NHS Pension Scheme changes. The Department for Health and Social Care has now begun responding to our numerous claims and has conceded that the 2015 scheme discriminates against doctors based on their age. Now that liability has been conceded by the Department for Health, our claims may be held pending the outcome in the claims brought by the judges and firefighters. We should have further developments in the next month or so.
Our members can rest assured that the BMA will continue to pursue this action on behalf of its members and will ensure that any remedy decided in our class action applies across the board. We are aware that some law firms have been actively trying to encourage doctors to brings their own claims in relation to the pension changes, and will no doubt be charging fees for their services. As the BMA is pursuing this action on behalf of all its members, doctors need not take any personal action and can rely on the BMA to take this action on their behalf.
The BMA understands how important pensions are for its members and will continue to fight to protect them on multiple fronts. The BMA has led the campaign for pensions taxation reform and will urgently engage with the next government to ensure this is achieved as soon as possible.
Vishal Sharma is BMA consultants committee deputy chair
"one solution would be to have no annual allowance but maintain the lifetime allowance in defined-benefit schemes and have an annual allowance but no lifetime allowance in defined contribution schemes. " This is intellectually incontinent, as does not cater for many people who will have several pensions, and may have a combination of DB and DC schemes. Don't forget there are quite few people in the country who are not actually doctors, and may have consequential harm from the remedies which the BMA proposes for those amongst the wealthiest 5%. I am not even a Jeremy Corbyn fan, but the BMA need to get real on this one.
I believe it was the bma that agreed the calculations for tax increases on DB pensions which is the most malicious part of this whole ferrago
Good statement Vish. Absolutely nothing should be off the table.
The present Govt (or whatever form it is in after the election) knows it.
For too long the BMA has not shown it true influence & bargaining power & truely needs to learn the power of mass action / collective action.
The 2016 Junior Doctors Action is a major learning point in Learn Not Blame ethos.
The BMA can act to restore faith & credibility in its institution & will do so by achieving more than this for the NHS, the country & millions who rely on it.
I am not amazed that BMA central signed this off. History suggests you and your bullying type make bad decisions. This is another example where older doctors insight has been bullied from the agenda by the naked self-interest of junior doctors.
For all the difficulties mentioned in this article it is absolutely vital that we as a profession stay shoulder to shoulder and refuse any extra work. Let’s not forget ministers have made the rules knowingly that we will be affected. The compromise offered by NHS England is a form of tax avoidance and no self respecting doctor should get involved in such scheme. That leaves us with two options do extra work for next to nothing or take the time and spend it with the family. I know what I am going to do. Happy Xmas to everyone.
This is affecting not just consultants but GPs too. Where is the leadership from the BMA? And where is the BMA leadership on the crisis of PCSE mismanagement?