Senior doctors in the BMA have welcomed the end to the NHS 'pension trap' for the majority of doctors, following a pledge to increase the annual allowance announced in today’s Budget.

Under plans set out by chancellor Jeremy Hunt, the tax-free annual allowance for pensions will rise to £60,000 while the lifetime allowance will be scrapped entirely.

The changes, which have come following years of campaigning by the BMA, mean that a significant number of senior doctors will no longer be subjected to punitive tax rules regarding how much they accrue within their pensions.

Levies applied to pension contributions have in recent years seen increasing numbers of consultants and other senior doctors forced to reduce their working hours or take early retirement in order to avoid being charged for working, at a time when the NHS staffing shortage is at crisis level.

Responding to today’s budget, BMA pensions committee and consultants committee chair Vish Sharma welcomed what he described as decisive action towards addressing the punitive pension rules that were threatening to exacerbate the NHS workforce crisis.

SHARMA: Perverse incentive will be reversed

He said: ‘Today’s announcement is an incredibly important step forward and the result of year after year of lobbying and campaigning for changes to pension taxation by the BMA.

‘The scrapping of the lifetime allowance will be potentially transformative for the NHS as [the majority of] senior doctors will no longer be forced to retire early and can continue to work within the NHS, providing vital patient care.

‘The rise in the annual allowance will mean far fewer doctors will receive large punitive pension tax bills and will significantly reduce the perverse incentive to reduce hours due to pension tax. It’s also very welcome the Government has committed to addressing the anomaly of ignoring any negative pension growth and rectifying this will ensure NHS staff can appropriately utilise their full annual allowance.’

A BMA survey of almost 8,000 consultants in England conducted last year revealed that 44 per cent intended to leave their roles ‘in some capacity’ over the next 12 months, with 38 per cent warning they would either ‘definitely’ or ‘probably’ reduce their contracted hours in 2023.

Dissatisfaction over unfair pension rules and erosion of pay saw the BMA conduct a consultative ballot of consultants in England last month, the results of which showed that 86 per cent backed taking industrial action should the Government fail to listen to consultants’ concerns.

Dr Sharma noted though that, whilst today’s changes to allowances were significant for members, there would still be some doctors who would continue to be adversely affected by existing rules, adding that the BMA would continue to support such individuals and campaign to protect all members from punitive pension taxation.  

He further added that, while the treasury had engaged constructively with the association over pensions, further work was now needed to address pay erosion and the ‘broken pay review process’.

‘We are pleased the Chancellor has acted decisively to avert a major workforce crisis, as a failure to do so would have resulted in a major risk to the NHS, to our patients and to the junior doctors we mentor and train.

‘However, the changes don’t address all of the issues and some doctors will still be adversely impacted by the annual allowance and in particular by the tapered annual allowance which hasn’t been meaningfully modified in these reforms.

‘This will mean some doctors will still need to think carefully before taking on additional shifts or doing overtime. We hope to continue our constructive discussions with Treasury in order to find a way forward to address this outstanding issue.

‘It is also vital that we don’t end up in this situation again that these limits must be kept under review to ensure their value is not eroded in real terms. Otherwise, we will simply find ourselves in the same situation in a few years’ time.’ 

He added: ‘Treasury officials have constructively engaged with us over pensions, resulting in today’s announcement. Consultants in England have written to the Government, asking them to come back to us outlining how it intends to fix pay and fix the broken pay review process. We look forward to the Health Secretary being equally engaging and coming back to us with a meaningful proposal.’