Taking care: Will NHS pension changes improve care?

In the first of a series of articles on the planned updates to the NHS pension scheme, Adviser Samantha Kaye looks at the recent proposal to change pension rules for top doctors, surgeons and other high-earning clinicians.

In August (2019), Health and Social Care Secretary Matt Hancock proposed an NHS pension change (via a public consultation), overhauling rules that have been largely blamed for deterring senior doctors from taking on additional shifts over fears of being hit with a giant tax bill.*

The announcement followed Prime Minister Boris Johnson’s promise that the NHS was a “top priority” in government, a comment backed by a £1.8 billion cash injection. But with the NHS deep in crisis, is this consultation enough to make a difference, or is it too little, too late?

The NHS in crisis

The NHS is under intense strain, an issue highlighted by recent British Medical Association (BMA) report, ‘NHS Pressures – Winter 2018/19: A hidden crisis’, which found that during last winter:

  • 1 in 4 people waited over 4 hours at major A&Es
  • 96% of trusts exceeded recommended occupancy levels
  • 4 in 10 NHS staff felt unwell due to work stress
  • Over 11% of ambulances were left waiting over 30 minutes.

Perhaps the most pertinent statistic related to the newly proposed NHS pension change was that 83% of consultant level staff were working extra hours unpaid.**

Ripe for reform

Following what the BMA labelled as ‘the worst winter on record for the NHS’, the time is nigh for proactive measures to alleviate the pressure on the health service.

The new public consultation will shortly open, proposing ‘full flexibility’ over the amount senior clinicians put into their pension pots, starting from next financial year. This means that senior doctors, consultants and surgeons will be able to set the level of pension accrual each year to allow them to work extra shifts without losing out financially.

For example, 30% contributions for a 30% accrual rate, or any other percentage in 10% increments depending on their financial situation. This would give them room to take on additional work without breaching their annual allowance and facing tax charges. Employers would then have the option to recycle their unused contribution back into the clinician’s salary.

The end of the ‘tax trap’?

This latest move comes after reports that senior NHS clinicians were declining additional shifts because working the additional hours meant they faced higher tax bills, a situation widely referred to as the ‘tax trap’. In fact, waiting lists have risen by 50% in some hospitals because doctors are turning down extra shifts.^ Under the proposal, they could freely take on additional shifts to reduce waiting lists, fill rota gaps or take on further supervisory responsibilities.

Alongside the proposals for full flexibility, HM Treasury will review how the tapered annual allowance supports the delivery of public services such as the NHS, engaging with the NHS, the British Medical Association (BMA) and other stakeholders.

A step forward?

The proposed changes have received a mixed reaction, with some arguing that it wouldn’t be sufficient, and others welcoming the announcement but warning that further reform is needed to sort out the major staffing issue.

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. Dr Claudia Paoloni, President of the HCSA union, representing hospital doctors, said: “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.

“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.”^^

Looking ahead

With the new public consultation to open shortly, it remains to be seen whether the changes will make a massive difference to the current NHS crisis; however, it is positive to see the government take proactive measures.

As financial advisers, we can see why the potential larger tax bills under current rules would be off-putting for consultants who are planning for a secure financial future, so this rule change has potential to not only help them plan effectively, but alleviate pressure on NHS waiting lists.

We will keep you updated as the consultation happens, and we will also be keeping a close eye on other proposed NHS changes over the coming months. Check back here for updates.

If you’d like to speak to Sam further, please email Samantha.kaye@sjpp.co.uk.


* https://www.gov.uk/government/news/nhs-pensions-for-senior-clinicians-new-changes-announced-to-improve-care
** British Medical Association, NHS Pressures – Winter 2018/19: A hidden crisis
^ https://www.bmj.com/content/366/bmj.l5135.full
^^ https://www.itv.com/news/2019-08-07/ministers-act-to-end-nhs-pensions-crisis-amid-rising-waiting-lists/

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Author: Samantha Kaye
Author: Samantha KayeAdviser