Pension tax rules threaten NHS as doctors ‘won’t work for nothing’
Author: Louise Prime
Doctors have warned the government that they “won’t work long hours for nothing”, after the introduction of new pension regulations that mean any payment for overtime is entirely lost through increased taxation. The British Medical Association (BMA) warned that this could lead to a shortage of consultants willing to do overtime to perform surgery, run A&E and attend deliveries, for example.
The BMA has been lobbying the Department of Health and Social Care and the NHS since the pension taxation rules changed two years ago, and again today wrote to the chancellor Philip Hammond to warn him that the current pension and tax rules are creating a “perfect storm” in the NHS workforce, forcing senior consultants to reduce their hours, retire early or leave the health service to avoid disproportionately large additional tax charges.
Hugh Pym explained on BBC Radio 4’s Today programme [47:13 to 53:20] this morning that the problem is caused by the Treasury, not the NHS. Although there is tax relief up to £40,000 a year on pension contributions, because the NHS pension scheme is pretty stable, with high employer and employee contributions, consultants can inadvertently get an unexpected a tax bill by doing overtime. He said: “There’s this perverse situation where adding an extra few hours to help reduce a waiting list or cover a rota gap can mean that all the extra pay that a consultant will get to help out an employer is eaten up by tax.”
Consultant in infectious diseases and BMA Council member Dr Sara Hedderwick told Today why patients should be concerned about this “perfect storm” that is affecting particularly doctors in the NHS. She said: “These changes are forcing the most experienced hospital consultants to reduce their workload – so they’re stopping doing many things in the NHS that we need, including taking on leadership roles, training roles and in some cases they’re even retiring early.”
She went on: “The tax and pensions regulations mean that some consultants are effectively paying their employers for the privilege of coming in to do any additional work. What that means is that we will get less operations performed because there aren’t enough surgeons to do them and no consultant anaesthetists to put you to sleep; A&Es may have to shut because there are no emergency medicine consultants to run them; and there may be no consultant obstetricians to deliver your babies or paediatricians to look after those babies if they have to go to the intensive care unit.”
Dr Hedderwick said she knew personally of consultants who had suddenly been presented with four‑, five‑ or even six-figure tax bills that they’d had no realisation were going to come to them.
She denied the suggestion that the “real problem” is not the Treasury’s tax rules but that the NHS has “fantastically generous pensions and is overdependent on overtime”. She responded: “The issue here is that the chancellor made changes to the pension taxation legislation after he changed the way employers’ contributions were made.”
She warned: “The chancellor really needs to acknowledge that this is a problem… If we don’t stop consultants paying this punitive level of tax then they won’t be able to do what they really want to do which is plugging workforce gaps in an already stretched NHS.”