Autumn statement reveals another raid on pensions
5 December 2012
Chancellor George Osborne’s autumn statement represents a mixed picture for doctors, the BMA has said.
Doctors leaders are pleased the government has declared national pay arrangements in the NHS will continue. But there are fears thousands of doctors could be affected by further changes to tax allowances.
Mr Osborne today restated the government’s commitment to national NHS pay deals and announced he was publishing full details of the replacement for the ‘discredited PFI’ (private finance initiative).
But Mr Osborne also revealed that pension contribution allowance rates would be reduced again. From 2014/15, the lifetime allowance for pension contributions will be cut from £1.5m to £1.25m and the annual allowance from £50,000 to £40,000.
BMA consultants committee chair Paul Flynn said: ‘A move to locally negotiated pay would be very damaging to the NHS. We are also relieved that the NHS remains due to receive a real-terms increase in funding next year, albeit a small one.
‘However, the change to the tax allowance on pensions savings will affect thousands of doctors — not just the highest earners. Doctors with long service in the NHS could be facing a large tax bill.
‘This is on top of the whole raft of changes the government is implementing to NHS pensions, including raising the normal pension age and hugely increasing contributions.’
The BMA will be examining the detail of the proposals and providing more analysis for members in the next few days.
Other announcements in the statement of interest to doctors include:
- An increase in the ISA limit to £11,520 from April 2013
- Cancelling the 3p-a-litre fuel-duty increase planned for January
- The Department of Health’s budget will be protected in 2013/14 and 2014/15
- Threshold for the 40 per cent rate of income tax to rise by 1 per cent in 2014 and 2015, from £41,450 to £41,865 and then £42,285
- £600m to be invested in scientific research infrastructure
- A decision to cap the amount spent on international development to 0.7 per cent of gross national income.
End to PFI debts?
The most recent reduction to the lifetime pension allowance, from £1.8m to £1.5m, only came into force this April. The annual allowance was reduced from £255,000 to £50,000 last year.
These allowances, which include employer contributions, are the upper limit that benefit from tax relief. People can save more money towards their pensions but have to pay more tax on the amount saved over these allowances.
Mr Osborne said the reductions would ‘reduce the cost of tax relief to the public purse by an extra £1bn a year by 2016/17’.
He said 98 per cent of people approaching retirement had a pension pot worth less than £1.25m and 99 per cent of pension savers make annual contributions of less than £40,000.
The replacement for PFI will be known as PF2. The Sandwell and West Birmingham Hospitals NHS Trust will be the first health organisation to explore it. The trust is looking to spend about £325m consolidating services from multiple sites and reorganising activity between hospital and community settings.
Dr Flynn said: ‘The BMA has long argued that PFI building projects resulted in many hospitals being crippled with very high repayment contracts. We are pleased that the chancellor has said he will reassess these contracts and we look forward to more detail.’
On international development, the government had committed to increasing ODA (official development assistance) from 0.56 per cent of gross national income in 2012 to 0.7 per cent next year. This is in line with a UN figure to help meet Millennium Development Goals.
However, Mr Osborne said the ODA would be 0.7 per cent in 2013 and ‘thereafter’.
In October, the BMA wrote to international development secretary Justine Greening calling for the 0.7 per cent commitment to be enshrined in law.
However, the association has cautioned against a cap on ODA especially in light of the impending deadline on meeting the millennium goals in 2015.
Read the BMA blog Autumn statement is mixed bag for doctors