Tax trap pension rules to change in effort to halt NHS crisis
An NHS pension “tax trap” blamed for deterring senior doctors and nurses from taking on additional shifts for fear of being hit with hefty tax bills are to be overhauled, ministers have announced.
The health secretary, Matt Hancock, said the move would ensure senior clinicians in England and Wales fully benefited from any extra work they took on.
However, some hospital doctors warned that the NHS was already facing “a full-blown winter meltdown” as a result of the crisis caused by the pension rules, while other experts cautioned that further reform was needed.
Rule changes introduced in 2016 meant rising numbers of consultants and other senior staff were facing unexpected tax bills linked to the value of their pensions.
Operations and clinics were cancelled as NHS senior staff withdrew from working extra shifts that would put them in the pension penalty zone. The fiasco was blamed for an increase in waiting times and led to cancer scans going unread for as long as six weeks.
Some NHS staff were reported to have had to remortgage their homes to cover their tax bills, while others were faced with the choice of cutting their hours, opting out of the pension scheme, or taking early retirement.
In a joint statement the Department for Health and Social Care (DHSC) and the Treasury said the changes would provide an “immediate solution” for experienced doctors and nurses facing sizeable tax rises in the current financial year.
The DHSC will also shortly publish a consultation document proposing wide-ranging “flexibilities” to the pension scheme to ensure that from the next financial year, frontline staff can remain in it without fear of financial penalty.
The move was welcomed by the British Medical Association (BMA), which has been leading the campaign to get the rules changed, as a “step forward”.
However the HCSA union, representing hospital doctors, warned that it would not be sufficient to prevent a “winter meltdown” in the NHS.
“It is fantasy to pretend that a little bit more flexibility, or distant promises of a Treasury review, will reverse the current descent into chaos within our hospitals,” said the president, Dr Claudia Paoloni.
“We are heading for a full-blown winter meltdown as a result of the government’s inaction on the NHS pensions crisis. A fifth of senior hospital doctors plan to quit in the next 36 months or have already left as a result of the issue.”
She added: “It is bitterly disappointing that the government is resorting to spin and hot air when it has known for many months that the crisis was deepening. The time for talking is long since over. We need to see the taper scrapped right now.”
Other NHS organisations welcomed Hancock’s announcement, but warned that much more would be needed to sort out what had become a major staffing issue. Chris Hopson, chief executive of NHS Providers, said it was having a “significant and direct negative impact” on patient care. “We won’t enable key staff to work the extra hours needed and put off ideas of early retirement until we have a clear, definitive solution fully in place. So we have to move fast.”
Siva Anandaciva, chief analyst at the King’s Fund thinktank, warned that senior clinicians were not the only staff affected. “It appears that health service managers have been left out of the plans, despite high vacancy rates.
“Chronic staff shortages are now the single biggest challenge facing the health service today, with nearly 100,000 vacancies in NHS trusts.
“In addition to pension changes, solving the NHS workforce crisis will require a raft of measures, including financial incentives to attract more nurses, and ramped-up international recruitment to plug the immediate staffing shortfall.”
The 2016 rule changes introduced a tapered annual allowance that restricted the amount of pension growth for individuals earning more than £110,000 a year before tax charges applied.
It gradually reduced the allowance for those on high incomes, meaning they were more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.
Under the new changes, senior staff will be able to decide their level of pension accrual at the start of each year, enabling them to select a level which gives them the “headroom” to take on additional work without breaching their annual allowance.
Their employers would then have the option to recycle their unused contribution back into their salary.
At the same time, the Treasury will carry out a review of the way the tapered allowance operates “to support the delivery of public services such as the NHS”.
— Tax trap pension rules to change in effort to halt NHS crisis to www.theguardian.com