The exodus of NHS consultants due to the tapered pension allowance

The NHS is currently facing a staffing crisis resulting in increasing rota gaps and a severe loss of workforce morale. The recent squeeze on tax breaks for consultants saving for their retirement is producing extremely bad outcomes for wider society in general, and the NHS in particular, that need to be urgently reviewed.

The tapered annual allowance, introduced in 2016, is aimed at clawing back billions of pounds in pensions tax relief handed each year to high earners. The tapered annual allowance sees the standard allowance whittled down from £40 000 to £10 000 for those with ‘adjusted’ yearly incomes of more than £150 000 and ‘threshold’ incomes of more than £110 000.

When the taper was announced it was described as ‘horrific’ and ‘nightmarish’ by pensions experts because of ‘fiendishly’ complex rules around when a reduction to the allowance is triggered.

The reasons for the introduction of the taper were sound enough. The lion’s share of the £25 billion or so annual net cost of pensions tax relief is racked up by higher and top-rate earners, who are in least need of help from the taxpayer to fund their pensions.

But far from hitting the private sector high-earners, who can take steps to swerve the taper, in reality it is wreaking havoc on key public sector workers, with large numbers of senior hospital doctors and GPs radically cutting their hours, or retiring early, to avoid landing in the taper zone. At a time when the NHS is already under severe pressure, these actions are having a direct impact on patient care.

The reason why the taper is having such a pernicious effect on the NHS is that, unlike the private sector, staff have few options to avert these tax bills, such as asking their employer to swap their pension for cash, or to reduce their pension contributions.

Doctors getting pay rises, promotions, or working extra shifts to help clear a patient backlog, are getting landed with shocking six-figure tax charges as high as £87 000 in some cases.

In a particularly egregious anomaly, senior doctors working overtime to help the NHS are facing marginal tax rates of as much as 100% on their overtime due to taper charges.

Further reform of pensions tax relief will not come without pushback, particularly in the public sector, but the Treasury cannot ignore the negative impact of the taper. It is bad medicine for us all and needs to be scrapped.

Do you agree? What are your thoughts and experiences? Do add your comments to this blog?

Comments (18) Add yours ↓
  1. Richard Morey Consultant Anaesthetist

    The pension taper fulfils the law of unintended consequences and of course punishes those who would hardly describe themselves as rich. Due to the complex calculations involved with a final salary pension scheme large amounts of tax become due following a fairly modest pay rise. This is of course only half the story as many doctors will also breech their lifetime allowance leading to further taxation. There are clever ways of mitigating tax due but depend on the skills and advice from financial advisors. Opting out of pension contributions is sensible but why stay in the NHS when moral and working conditions are so poor? I’m afraid I’m one of the many leaving!

    April 18, 2019 Reply
  2. Roger Kirby Professor of Urology

    In an attempt to circumvent the pension taper 10 NHS trusts are offering to give the employer’s pension contribution in cash rather than putting it into their retirement savings, an arrangement that is not usually possible under national NHS policy.

    This means doctors do not lose out on employer’s contributions, which are worth 20.6 per cent of the pensionable salary, when they opt out of the NHS pension scheme.

    York and Harrogate NHS trusts are among the organisations offering cash payments to senior doctors. The health department and NHS authorities are aware of the arrangements.

    “Our trust has an established scheme to support employees who wish to opt out of the pension scheme because of the lifetime allowance cap,” a spokesperson for the York Teaching Hospital NHS Foundation Trust stated.

    April 20, 2019 Reply
  3. Ian Pearce Professor

    This is a huge national issue with consequences that will be felt for a generation, if not more.
    As well as encouraging colleagues to reduce NHS hours to avoid excess taxation, it will signal an end to the ACCEA system used to reward those going above and beyond on an almost daily basis.
    Perhaps it is these and other consequences that are the intended sequelae of such ill thought out pension changes.
    It is interesting that the judiciary and the political establishment have managed to avoid such pension changes – is it beyond the medical profession to unite and enforce a reversal with compensation for the many who have opted out of the scheme as a result of such changes?

    April 20, 2019 Reply
  4. Christian Brown Urologist

    Many doctors, including myself, have little or no financial knowledge of such a complex taxation system and are now using many of the expert advisory services available. However, it’s clear the advice can vary and I have had conflicting opinion on which way to go with pension, PA reduction and private practice. The NHS is not an easy workplace at the moment and further financial barriers to staying will unfortunately cause many more to leave I’m sure.

    April 22, 2019 Reply
  5. Roger Kirby Professor of Urology

    Another great article by the @JosephineCumbo giving incisive commentary on the NHS pension crisis… “Senior NHS doctors will reduce their hours on an “unprecedented scale”, “seriously impacting” patient care in the UK,

    April 26, 2019 Reply
  6. Roger Kirby Professor of Urology

    GPS are retiring early from the NHS as well as Consultants. Research conducted by the Health Foundation yesterday found increasing numbers of patients and fewer GPs to go around. There is one GP for every 2,160 patients in England – an increase of 8 per cent in three years. It is the first time since the 1960s that GP numbers have fallen for so long.
    However, the workforce has shrunk 50 per cent faster in the poorest regions – which often have the most complex patients as well. On average, a GP working in the most deprived boroughs is responsible for 370 more patients than those in the most affluent.

    May 9, 2019 Reply
  7. Roger Kirby Professor of Urology

    Ministers are planning a major shake-up of NHS pensions designed to stop an exodus of senior doctors retiring early because current tax rules mean they can end up working for free, especially if they take on extra duties.
    Philip Hammond, the chancellor, and Matt Hancock, the health and social care secretary, are studying plans which would end what NHS bosses and doctors’ leaders say is a “ludicrous” pensions tax trap that is exacerbating the health service’s already severe staff shortage.
    They are considering changing the NHS pensions scheme so that staff can make only half their usual pensions contributions for up to 10 years during their careers. It is known as a “50/50” pension because healthcare personnel pay only half the usual amounts for a set period, but then receive commensurately less money when they start drawing their pension in retirement.

    May 13, 2019 Reply
  8. Roger Kirby Professor of Urology

    There has been a ‘sharp rise’ in the number of GPs seeking pension advice, with some GPs facing personal bills of up to £50,000, a financial planning and investment firm has reported.

    Tilney said it had received nearly 50 consultants and GPs appointment requests via their website to meet with financial planners over the past month.

    This comes after Reports that that some doctors have had to invent ‘DIY’ work-arounds to avoid huge NHS pension tax bills, including using a ‘hokey cokey’ approach.

    Tilney chartered financial planner Gary Smith said the firm has seen a ‘sharp rise in the number GPs and consultants seeking specialist financial planning advice as a result of being impacted by more complex pension allowances’.

    May 15, 2019 Reply
  9. Roger Kirby Professor of Urology

    Concerns have previously been raised that recent changes to the pension tax regime were encouraging doctors to reduce the amount they worked. The annual allowance taper, introduced in 2016, restricts the amount of tax relief available to those with a threshold income over £110,000, reducing it from £40,000 to £10,000. This has led to some people incurring large tax bills on their pension contributions.

    However, the BMA has now produced guidance to show some consultants may also benefit from a larger pension if they reduce their hours. A case study included in guidance slides revealed a 40-year-old consultant working 12 programmed activities and using the scheme pays option would have a pension of £36,511 in today’s money at age 60.

    A graph in the guidance revealed if that consultant cut their PAs to eight, their pension would be around £42,500 in today’s money at age 60. A consultant who cut their PAs from 12 to seven would have a pension of around £42,000 at the age of 60.

    May 15, 2019 Reply
  10. Roger Kirby Professor Roger Kirby

    The Department of Health and Social Care said this morning it was consulting on new plans which would give senior clinicians more flexibility over the rate their pension builds and allow them to “freely take on additional shifts to reduce waiting lists, fill rota gaps or take on further supervisory responsibilities”.

    In particular, the department said it would consult on a proposal known as the 50:50 option, which would allow clinicians to halve their pensions contributions in exchange for halving the rate of pension growth.

    June 3, 2019 Reply
  11. Roger Kirby Professor Of Urology

    Dr Chris Booth, Consultant in Intensive Care Medicine and Anaesthesia, SRFT Dr Simon Tomlinson, Consultant Anaesthetist and LNC Chair, SRFT
    The BMA is right to highlight the negative consequences of large numbers of consultants reducing their working hours or retiring early in order to reduce the impact of excessive pension taxation. This will only worsen the workforce crisis that currently exists in all specialties. The combination of large “deemed” pension contributions, a recent reduction in the annual allowance and the annual allowance taper has led consultants to consider reducing hours and opting not to work extra sessions. This is a significant patient safety issue.
    It is increasingly clear at a national level that many doctors plan to reduce their hours but it is equally important that all stakeholders (doctors, patients, commissioners and politicians) realise how this will have a tangible negative impact on patient care at a local level. We became aware in late 2018 and early 2019 of widespread concern regarding the impact of pension taxation changes on the consultant workforce at Salford. As awareness heightened it was considered that consultants would seek to mitigate their personal liability through reduction in both contracted clinical PAs and additional work as Waiting List Initiatives (WLIs). This would clearly have a major impact on the ability to deliver the “outstanding” clinical service at Salford with a reduction in the quality and safety of the care available to our patients.
    We conducted a survey of the consultant workforce at Salford Care Organisation (SCO) in order and quantify the reality of consultant intentions regarding their individual clinical commitments and provide evidence to support the trust in raising concerns about the impact on patient care at a national level.
    The survey was sent via email to all SCO consultants (n=463) and was conducted using an online Google forms survey tool. A total of 203 responses were received. 60% of respondents were working above 10PAs as part of the normal working job plan. At the time of the survey 21 (10%) consultants had already reduced their contractual workload with a combined loss of 35 clinical sessions (equivalent to 5 Whole Time Equivalent (WTE) consultants based on a standard Direct Clinical Care (DCC) commitment of 7.5PAs per week). 139 (70%) consultants indicated that they were definitely or possibly intending to reduce their contractual workload within the next year with an estimated loss of 168 clinical sessions (equivalent to 22 WTE consultants). 144 (71%) consultants reported that they were less likely to undertake additional clinical work (known locally as Waiting List Initiatives) as a direct consequence of pension taxation. This is already manifested in our Trust with an increased volume of elective operating being cancelled due to lack of doctors volunteering to cover such lists as WLIs. Finally, 114 (56%) consultants indicated that they were considering bringing forward their planned age of retirement as a direct consequence of pension taxation.
    The results of this survey are deeply concerning. When extrapolated across the whole consultant workforce, our care organisation is facing the loss of consultant sessions equivalent to at least 50 WTE consultants, representing over 10% of consultant clinical service delivery. This devastating loss of consultant time is further compounded by the indication that consultants are no longer planning to undertake additional non-contractual work and are also considering earlier retirement. This triple whammy of actions will undoubtedly cause a profound lack of consultant delivered care with an inevitable negative impact on access to services for our patients and the quality and safety of the care they experience.

    As awareness of the taxation spreads further we predict the situation will become even more pronounced. Cumulative loss of annual allowance “carry forward” will cause year-on-year reduction of individuals work commitments as they balance current income against future pensions and associated taxation
    The results of our survey demonstrate that there is tangible threat to patient safety at our major teaching hospital. We suspect this situation exists across the UK and hope that the evidence we have provided can reinforce the importance of rapid action at a government level in order to avert a crisis in patient care.

    June 12, 2019 Reply
  12. Roger Kirby Professor of Urology

    Pension modeller for BMA member consultants will be available from 4th July – next Thursday. Ease your pension tension by planning & knowing what’s ahead. BMA Consultants have developed an algorithm on unbelievably complex parameters.

    June 29, 2019 Reply
  13. Roger Kirby Professor Of Urology

    The health secretary has urged doctors not to take steps to retire early yet as he is committed to solving pension tax issues by the ‘new financial year’.

    It comes after the Government announced a review to make pensions ‘more flexible’ for GPs in a bid to address retention issues.

    More than 50% of GPs plan to stop practising before retirement age for reasons including problems with pensions, according to a new survey.

    Health secretary Matt Hancock told the Health and Social Care Committee yesterday that he regards the pension tax issue as ‘very serious’ and an ‘urgent priority’ that has to be solved ‘as soon as possible’.

    July 10, 2019 Reply
  14. Roger Kirby Professor of Urology

    Dr David Rosser, of University Hospitals Birmingham, said pension tax changes mean consultants fear extra earnings will trigger large bills.

    One senior doctor covered shifts, which would otherwise have gone unstaffed, for free to avoid a huge tax bill.

    The government said it was looking at more flexible pension rules.

    The Department of Health and Social Care said it would be “consulting on proposals to make NHS pensions more flexible for senior clinicians, in response to evidence that shows this issue is having a direct impact on retention and front-line service delivery”.

    Currently the loss at University Hospitals Birmingham, which employs 1,200 consultants, is equivalent to the work of 10 full-time consultants. The trust fears that could rise to around 60 within 18 months to two years.

    July 20, 2019 Reply
  15. Roger Kirby Professor of Urology

    Cancer scans showing the presence or spread of the disease are going unread for as long as six weeks as the impact of the doctors’ pension dispute on patient care worsens.

    Hospitals are increasingly having to reduce the services they can provide as thousands of consultants stop doing overtime in order to avoid being hit by unexpected tax bills of up to £80,000.

    “Radiology waiting times are unacceptable, with delays of five to six weeks for cancer patients on treatment to get a report,” said one consultant quoted in a new dossier of evidence collected by the Hospital Consultants and Specialists Association (HCSA).

    A consultant radiologist at another hospital said: “Scan report turnaround time has gone from one week to over a month. Unexpected and critical findings are going unreported for weeks. We are now just firefighting.”

    July 21, 2019 Reply
  16. Roger Kirby Professor of Urology

    Health service leaders have appealed to Britain’s new chancellor to scrap a pension tax rule that they say is making a “mess” of the NHS workforce and contributing to a growing crisis in patient care.

    In an unprecedented intervention on tax policy, the NHS Confederation publicly urged Sajid Javid to axe the tapered annual allowance, which restricts pensions tax relief for top earners.

    The NHS Confederation, which represents organisations across the healthcare sector, said the taper was leading to doctors reducing their hours, or quitting early, to avoid pension tax bills.

    “This is a government created mess and it is past the time when ministers should have cleared it up,” said Niall Dickson, chief executive of the NHS Confederation.

    “Operations are already being delayed and cancelled. We are seeing doctors and other senior staff reducing their hours and, in some cases, leave the NHS, all doubtless because someone failed to think through the full consequences and effects of these changes to taxation policy.”

    August 2, 2019 Reply
  17. Roger Kirby Professor of Urology

    Urgent changes to pension rules will be introduced to allow senior NHS clinicians to take on additional work without fear of incurring large tax liabilities, the Government announced today.
    Ministers said changes would allow consultants and other higher earners to ‘scale down’ their pension contributions without losing out on employer contributions.
    The Department of Health and Social Care (DHSC) said the changes, made in partnership with the Treasury, would mean senior staff could run additional clinics for patients.
    The British Medical Association (BMA) welcomed the changes to “perverse and ill-thought out tax legislation” which it said was having a damaging effect on the health service. However, it warned that further pension taxation reform would be needed.
    The DHSC promised to explore ways to restore the incentive for higher paid health workers to continue to belong to the NHS pension scheme and take on additional work and responsibilities after new 2016 pension rules drew increasing numbers of higher earning doctors into upper taxation bands through annual and lifetime contribution caps.

    August 7, 2019 Reply
  18. Roger Kirby Professor of Urology

    The health secretary is facing a backlash from senior NHS figures who say proposed pension changes for doctors are unfair to them. One hospital trust chief executive said he felt like a “second class NHS citizen” because of the exclusion of managers from the reform announced on Wednesday.
    Matt Hancock and Sajid Javid, the chancellor, have announced an overhaul of pension rules to allow top doctors and surgeons to treat more patients without losing out financially. Clinicians have been refusing to work beyond planned hours because of new rules introduced in 2016 meant that overtime pay was clawed back in tax.
    The new rules will allow NHS employees to scale down pension contributions without losing employer contributions. And the Department of Health and Social Care is to consult on proposed “flexibilities” to the pension scheme to ensure that from the next financial year, frontline staff can remain in it without fear of financial penalty.
    Health service union Unison warned that the move would help only a small proportion of NHS staff and “looks alarmingly like the beginning of a ‘clinicians-first’ approach to pension strategy”.

    August 8, 2019 Reply

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