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Many of our members across the UK are raising serious issues with the current Annual Allowance and Lifetime Allowance taxation rules. Today’s release of new slide sets for consultants in England outlining in detail the complexities of the NHS pensions schemes will provide them with the guidance they need to understand what these rules mean for them.
The separate changes to pensions taxation and the NHS pension scheme have resulted in a perfect storm that results in doctors being hit by these unfair taxes. Unless there is an urgent change to this taxation policy, the NHS will face a workforce crisis as doctors act to reduce the work they are doing to avoid these punitive charges.
The BMA has been lobbying the Government extensively on your behalf to highlight the risks of their policy on the NHS and on patients. In our most recent letter to the Chancellor we were clear that doctors are being forced to retire, and the majority will need to consider reducing their workload, abandoning leadership positions and stop covering vacancies.
The early results of a survey of more than 4,000 consultants in England show that 30 per cent have received an annual pension allowance tax charge in the last two years. This demonstrates the scale of the problem, but more concerning is this is likely just the tip of the iceberg. The BMA’s modelling suggests that all full-time consultants will be affected by annual allowance charges in the future as members will no longer be able to carry forward any non-tapered annual allowanced from this year.
Our same survey shows that 60 per cent of consultants are undertaking additional work. Yet without swift and decisive action on behalf of Government consultants will have no choice but to drop this additional work to protect themselves from punitive charges. One thing that won’t provide the assurances our members need will be the proposed introduction of a 50:50 scheme suggested by the Department of Health and Social Care and NHS Employers.
Such a scheme would mean that NHS scheme members could choose to pay pension contributions on half of their pensionable earnings. In return they would only accrue pension at half of the normal rate (i.e. would accrue 1/160ths in the 1995 scheme or 1/108ths in the 2015 scheme). The BMA have modelled this “solution” extensively and this will not solve the problem faced by consultants. A 50:50 scheme does nothing to remove the tax cliff that occurs at the threshold income of £110,000 and as a result many consultants will still face the prospect of reducing sessions and refusing to cover vacancies or waiting lists to remain below this threshold.
Furthermore, a 50:50 scheme is far too inflexible and under such a proposal, consultants would still incur significant annual allowance tax bills in some years and yet under pay into their pension in others. The net result of this would be to reduce the pension available upon retirement and this would result in a further financial detriment to consultants at a time when their pay has reduced by 30 per cent over the last 10 years. This financial detriment would be significantly exacerbated in trusts that had not implemented a policy on recycling of employer’ pension contributions as the value of this on the 50 per cent of pay that was no longer pension could be lost.
There are however indications that the Government and the Department of Health are beginning to grasp the seriousness of the issue. Last week the Chancellor conceded there was a problem which they were looking to address. This week, in the most recent parliamentary questions to Health Ministers, MPs from across the political divide – Philippa Whitford (SNP), Paul Masterson (Conservative) and Lucy Powell (Labour) – all questioned the Government’s approach so far – with the Department of Health indicating they were now in talks with the Treasury.
More than 1,600 consultants have written to their local MP using the BMA’s template letter. It’s important that we continue to put pressure on the Government and I would urge you to add your voice using the tool available here.
You can find more information about the impact of the annual allowance taxation rules on consultants including a briefing on the Consultant Committee’s work here.
What can you do?
It is important that you consider the amount of additional PA’s you are working and the impact this could be having. In the coming weeks the BMA will be releasing a tool to support members in calculating their pension growth and annual allowance charges. This will provide vital information so that members understand the implications to them. And just because you are earning less than £110,000 does not mean you may not be affected. Initially this calculator will only be for consultants on the 1995 and 2015 pensions schemes but an update including the 2008 scheme will be available in the next few months.
Once it is launched I would urge all consultants to use the calculator as soon as possible.
To prepare for this it’s important that you have all the documentation required. This includes:
Demonstrates Pensionable Pay as well as Taxable Pay & Pension Contributions
If you have any questions or concerns you can find a number of answers on the BMA’s website.
Rob Harwood is chair of the BMA consultants committee
I would like to thank the Chancellor for the outrageous Pensions Tax. It made my mind up for me: I have joined the brain drain and retired from full time practice.
I have significantly reduced hours
Right in the middle of the "perfect storm". Last year £16250 pension input=£19000 tax bill (payment on account triggered) so my net income was less than when I started as a consultant. Next year I have an increment which will trigger another big tax bill because of the effect on my 95 section pension, so the same again.
Scheme pays is a rip-off unless you're very close to retiring.
Personal decision making: a regular 1/2 day off is now worth more than a PA for management work, I do no extra sessions unless they are converted to TOIL at a favourable rate.
Net result for the Treasury is that (increments not withstanding) I will now be paying about £3k less tax/year than before the taper was introduced.
& I'm only a small player in this. The consultants who are hardest hit are the ones who have worked tirelessly to advance healthcare and the NHS. The money is 2nd or 3rd on their list of concerns until this hits them.
Already reduced my hours, sweating on receiving a big tax bill for last year. Situation is disgraceful, have had to cut clinical work by 8 hours per week. Not quite sure how this is helping the NHS.....
Found out this year that the TPD role I have undertaken for the last five years actually cost me more in tax than it paid me for the last two.
Oddly enough HEE cannot find a replacement for me...
Looks like I shall be aiming to shed 2 sessions this year, and another two in 5-6 as anything else would be financially crazy.
What the chancellor is gaining in tax revenue will a drop in the ocean compared to the cost of training doctors to replace the experienced consultants and GPs who are leaving the profession in droves. The BMA must continue to raise this at the highest levels. I and colleagues have been trying to give up PA's for months, but taken ages for trust approval and then no locums around to pick up the workload. It is a mess.
I work NHS sessions only. I have toiled for 11PAs. I have accrued some CEA due to, I believe, hard work, management, research and innovation. My tax returns usually comprise about 5 boxes: income, tax, charity, professional fees and minor expenses (I.e. nothing else).
Have now been told that due to an increment in past two years to expect a tax bill of >50k.
That’s me screwed. Is there any point in continuing to work for NHS, to shorten my life with stress and be broke with never ending mortgage? I’m still only early 50’s
Perhaps the BMA should recommend (or threaten) that Consultants / Senior GPS all reduce their working sessions to three days a week or fewer (to include time out for on-call commitments) as a means of protest. The service would grind to a halt inside a fortnight! This would almost certainly get immediate attention from politicians and hopefully they might see sense and change the rules? We could all then return to work and increase our hours once again. What a nonsense this all is....the law of unintended consequences?......or perhaps the ploy is for us all to opt out of the NHS pension scheme and make our own private pension provisions, thereby saving the cost of providing pension payments to the Public sector?
These irresponsible government functionaries are digging their own grave.
I’m going to cut my NHS sessions and relocate to Australia. Goodbye!
This is the only country in the world that is penalising such highly skilled doctors for working hard / earning well after spending umpteen years in training. This is going to create a huge vacuum within nhs and looks like the government is staring down an abyss!!
Clinical lead for large dept - most of us stopped doing extra sessions meaning we now are paying much higher priced agency locums to cover rota gaps. Steady stream of consultants coming to ask to drop clinical work due to fears of massive unpredictable tax bills. Somedays it seems all that is discussed in offices and coffee rooms is pension tax bills or the fear of them. Lists being cancelled: 7 lists gone on one weekend day alone, 5 on another.... solely due to worried staff reducing work re tax - utterly utterly utterly stupid.....
Despite working 10PAs, NHS only, I will be hammered with a tax bill which will more than negate the increments which triggered it. Having done the stupid hours at rip off rate as a junior and worked equally hard as a consultant on the promise of a decent pension I have been royally screwed and am taking the only sensible action; early retirement and become a well paid locum, probably in my own department.
The BMA are about as effective as a fart in a hurricane. ‘Lobbying’ indeed...how about some proper action to justify your members’ subscriptions?
Please ask your profession for an opinion of action to take. It’s unlikely that ‘lobbying’ will have any effect. As you say a perfect storm awaits and the BMA rearranged the deckchairs