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The pensions paradox: would you pay to work?

The Doctor Issue 10 – June 2019 pensions

Punitive tax bills are forcing doctors to reduce their hours or retire early, even though they want to work and the health service desperately needs them. Jennifer Trueland describes the anger and sense of betrayal felt by doctors, and the pressure being put on the Treasury to change its self-defeating rules

Irfan Malik loves his job as a GP and trainer. It’s what he always wanted to be and imagined he would continue enjoying it up to retirement.

A senior partner at a practice in Sherwood, Nottingham, where he has worked since 1998, he admits he had given little thought to pension arrangements until he realised he was at risk of a hefty tax bill.

Following extensive investigations, including obtaining professional advice, he has cut his hours and left the scheme.

‘I’ve always been a head-down, full-time GP and trainer and I never really thought about the pension side of things,’ says Dr Malik (pictured below). He had previously been a member of the 1995 NHS pension scheme, then the 2015 one.

‘I had checked three or four years ago and was well under the lifetime [allowance] limit, so I thought I didn’t have anything to worry about. A comment from my registrar [about changes to the lifetime and annual limits] was the trigger for me to look into it. I found it was a real issue. Some colleagues – even people in their 40s – had been stung with tax bills running into five figures.’

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After seeking advice and thinking it through, Dr Malik stopped paying into the scheme and dropped his hours from full to three-quarter time.

‘It means a reduction in income,’ he says. ‘It’s disappointing because I really do enjoy my job, but I’ve seen other doctors basically having to pay to do extra work, and I don’t want to take that risk.’


No warning

Dr Malik is not alone. Changes to pension legislation three years ago are causing huge problems for doctors and other public sector workers by placing new limits on the amount that can be paid into a pension each year.

A new ‘taper’ for higher earners means that the current standard annual allowance can reduce to £10,000 and that those who exceed the limits can be hit with punitive tax bills.

The way that these bills are calculated is complex. It can be done several years in arrears, meaning doctors can be hit with a huge tax bill without any warning.

Although awareness of the issue is growing – especially as vast bills hit doctors’ doormats – the BMA wants all doctors to recognise where they might be at risk, and to take advice and action accordingly.

Alan Robertson, a member and former chair of the BMA pensions committee, says it is important to get the message out among consultants.

‘I think there’s higher financial awareness among GP partners because they run practices and have accountants, but hospital doctors don’t necessarily have that level of awareness so they won’t know anything about it until they actually have a breach. That’s why people are being surprised by bills running into tens of thousands of pounds,’ he adds.

‘I know one person who did £2,000-worth of extra work and got a £9,000 bill – nobody thinks that’s sensible.’

‘I really do enjoy my job, but I’ve seen other doctors basically having to pay to do extra work’

He warns that even if the Treasury wises up and reverses the punitive changes, the effects on the workforce could be long-lasting – and devastating for the health service.

‘Some people might get used to the idea of taking a day off a week – they might find it pleasant to have a better work-life balance, spend more time with family or on hobbies. These people will be hard to persuade to come back to the workplace full time.

‘We’re also seeing people in their mid-to-late 50s going to Australia, New Zealand and Canada. People are leaving early and the NHS really can’t afford to lose this level of expertise.’


Betrayed and unfair

The BMA is taking action on this issue, including writing to chancellor Philip Hammond, and pointing out the potentially devastating effect on the medical workforce if doctors decide to cut hours or refuse overtime or extra sessions to help in emergencies or to meet waiting-times targets, for example.

They are also following closely the progress of legal challenges to the schemes for judges and firefighters.

In England, the health and social care secretary has agreed to consult on pension reform and discuss further flexibilities.

The BMA has said that the Government needs to improve on a proposal where employees would halve their contributions in return for half the pension accrual, a move insufficient to remove the incentive to reduce hours.

This isn’t only about not doing ‘extra’ work, however. The health service relies on consultants working over and above the ‘ideal’ contract of 10 PA (programmed activities) per week, with many contracted to work 11 or 12, which is effectively up to a fifth more hours than ‘full-time’.

This would mean that if they dropped two sessions per week, the number of ‘full-time’ consultants would not change on official workforce returns, but the number of hours available to the NHS would see a drastic reduction.

Again, this would prove potentially very serious for the health service: imagine trying to fill rotas with a fifth fewer hours available, although apparently still the same number of ‘bodies’ on the ground.


Career crisis

When he talks about the pension crisis, Paul Youngs (pictured below) sounds almost emotional. There’s a real sense that he feels betrayed – and he warns that he is not alone in reacting that way.

‘I’m 53 and have been working for the NHS for 30 years,’ says Dr Youngs. ‘When I was a junior doctor I was working 80-odd hours a week, one in three weekends, and one in three nights on call. While I was paid at the full rate for the first 40 hours, the rest of the time I was paid at a third of the hourly rate.

‘It was punishing and I was giving many hours free to the NHS, but it was part of what you could call the covenant: we worked hard, but the NHS was a lifelong career, and we would have a good pension at the end of it. It was deferred reward, if you like, and people really bought into that.

‘Now these same people are staring down at large tax bills and are really wondering what they did it for.

‘I gave my 20s, 30s and 40s, have dedicated my life to the NHS, so it’s fair to say I have an emotional response to this. People feel trapped, they feel betrayed, and they feel it simply isn’t fair.’

‘I know one person who did £2,000-worth of extra work and got a £9,000 bill – nobody thinks that’s sensible’

As well as being a consultant anaesthetist in Plymouth, Dr Youngs is chair of the BMA pensions committee.

He is making it his mission to raise awareness of the pension changes so that other doctors can look into their personal situation and take appropriate action.

This might include cutting overtime, reducing hours, or even stopping paying into the scheme, though the BMA does not advise this.

‘I’m not a technical tax expert, but our default position is that everyone should be in the NHS pension scheme – it’s part of the overall reward package for doctors. It’s a massive dilemma for each individual and doctors have to be pension aware.’


Cutting hours

While some doctors have felt they have had no choice but to remortgage their houses to meet the unexpected tax bills, the other option is something called ‘scheme pays’, where the scheme settles the bill directly with HMRC and the member effectively has a loan to which interest is applied which is deducted from benefits at retirement.

This, of course, will have a detrimental effect on their pensions when they eventually get them. ‘They call it “scheme pays” but it’s really the doctor that pays,’ says Dr Youngs grimly.

But there are doctors who feel they have no choice but to do that – and to cut their hours to ‘safeguard’ their future as far as they can. One of these is Anne Carson, deputy chair of the BMA in Northern Ireland and a consultant radiologist in the Southern Trust.

‘We’ve all been putting our shoulders to the wheel, trying to do our best for patients, and we’ve been punished with huge tax bills,’ she says. ‘I’ve had to cut down my hours – I’ve halved my work to earn the same amount of money. I’ve decided that I’m sick of paying to go to work, and I’m not going to do it any more.

‘As I see it, it’s a raid on our pensions and it’s a raid on pay – and at the end of the day, it’s the patients who suffer. It simply doesn’t make sense unless the long-term goal is to take down the NHS and screw all doctors, but either way, it isn’t sustainable.’ 


What the BMA is doing

  • Raising the issue with senior politicians, with letters already to the health secretary, chancellor, two defence secretaries and the health select committee
  • Briefing parliamentarians, with MPs recently challenging the chancellor about what he intends to do to mitigate and protect against the risks created
  • Encouraging members to use an online tool to contact their MPs. Around 2,000 emails have been sent
  • Producing guidance for members
  • Campaigning strongly on the issue in the media, raising awareness about the unfair and counter-productive impact.

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