Cut to pension annual allowance to fund NHS could drive doctors away

A potential cut to the pensions annual allowance at the Autumn Budget, in order to find extra money for the NHS, could drive doctors away, it has been suggested.

According to Chase de Vere Medical, any reduction to the current £40,000 annual allowance could lead doctors to quit the service. Last month the British Medical Association called on the Treasury to rethink the pensions tax rules amid an NHS “recruitment crisis”, with some doctors quitting the service in fear of breaching the tax limit.

Those that have breached the annual pension allowance will receive an annual pension savings statement in the coming weeks. Even if doctors don’t receive a pension savings statement, it doesn’t mean that they don’t have a pension tax issue. This is because even though statements are, in theory, only sent to those who have breached the annual allowance, the calculations used are based only on contributions made to the NHS Pension Scheme and won’t include payments to any additional private pensions.

Commenting, Chase de Vere Medical head Andrea Sproates said: “Doctors have been hit hard by previous changes to lifetime and annual allowances, including the tapered annual allowance which was introduced in 2016. Many are struggling to understand the tax position on contributions to their NHS Pension and are unsure whether they can make any additional tax efficient pension payments.

“This uncertainty is compounded for those who don’t receive an annual pension savings statement, as they may wrongly believe that they won’t be subject to an annual allowance tax charge, whereas that might not be the case if they are also making private pension contributions. If there are further cuts to the annual allowance, this will have a catastrophic effect on the pension planning of many doctors. We will see huge numbers facing additional tax charges and a significant number of the most experienced doctors may leave the NHS altogether.”

Sproates said that it is the most experienced doctors who will be hit hardest by further cuts, as they have higher earnings and have already accumulated greater pension benefits. This also means that they will be most able to retire.

“It is ironic that a plan to provide money to help support the NHS could have the perverse effect of depleting the service by driving some of its most experienced, talented and valuable professionals away,” he said.

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