Critics rebuke Hancock's 'narrow' NHS pension consultation

The consultation, announced by the health secretary Matt Hancock on Monday, invites views on pension flexibility proposals that seek to end the issues caused by tax-free allowance limits – rules that have prompted some senior doctors to effectively pay to go to work.

But the BMA said it was highly sceptical of the consultation, as it asks for responses to a specific policy proposal – the so-called 50:50 option, where employees accrue half the pension for half their usual contributions – that the BMA has repeatedly declared would be inadequate.

The 50:50 option helps at the margins, but it doesn’t get close to the root of the problem

Sir Steve Webb, Royal London

“We wanted a consultation that included realistic options to bring an end to this ridiculous, but serious, crisis we are now facing,” said Dr Rob Harwood, chair of the BMA consultants committee.

He continued: “The BMA believes the only real solution is to scrap the annual or tapering allowances with immediate effect.”

Doctors lose incentive to work

Patients are being put at risk, doctors say, with many senior staff cutting hours or retiring early to avoid being penalised by 2016 changes to the NHS pension scheme. The issues are mostly linked to the tapered annual allowance.

Currently, employees can save up to £40,000 a year and £1.055m in their lifetime before incurring income tax on pensions contributions. But since 2016, employees with a taxable income over £150,000 have had their annual allowance for that tax year restricted – for every £2 of income they earn above £150,000, their annual allowance is reduced by £1. This means that senior doctors and other high earners see their annual allowance cut further, to as low as £10,000, with many fleeing the profession early to avoid large tax bills.

Dr Harwood continued: “Doctors need to be able to return to doing the additional work they had routinely undertaken in the past to ensure high-quality, safe patient care. We believe an effective consultation should have explicitly included the option to scrap the annual allowance or tapering annual allowance.”

BMA wants range of accrual rates

The 50:50 option is criticised by the BMA as insufficiently flexible, leaving doctors paying too much tax in some years and not enough in pension contributions in others.

Dr Harwood said: "This consultation does little other than add to the intolerable dilemma facing many doctors – a commitment to their patients put in jeopardy by these ridiculous taxes which are forcing doctors to effectively pay to go to work.”

He added: “The government must recognise there needs to be a full range of scaled pension membership from 10:10 to 90:90, each with recycling of the residual employer contributions. A fully flexible approach like this would be cost-neutral to the NHS, because the employer’s pension contributions being given up would be paid as taxable salary. Without recycling, a 50:50 approach would be a substantial pay cut for GPs and hospital doctors, and – with such an unattractive offer – almost certain to be set to fail.”

NHS staff appear to agree. Nicholas Grundy, chair of campaign group GP Survival, said the 50:50 options was "better than the current situation, but not enough of an improvement to mean people will actually go back to working extra shifts, or more sessions".

Dr Grundy said a further pernicious effect is that "people who go 50:50 will still have their annual allowance tapered by exactly the same amount, because their overall income doesn't change, and actually more people will be caught by it – because if you go 50:50 your threshold income is higher because you lose half your pension contributions towards it".

Of course, fewer doctors would be hit by a charge for breaching the allowance, but it is unclear whether this will solve the Department for Health's problem – that doctors are not incentivised to work more hours.

"What this has revealed to doctors is that they can cut their hours by a significant proportion for a relatively small reduction in pay, and they still maintain a decent pension, and get significantly more time at home with their families," said Dr Grundy.

A new start needed

Sir Steve Webb, director of policy at Royal London, echoed the BMA’s calls for the abolition of the taper. 

“The consultation is way too narrow in scope. It’s true that the 50:50 option helps at the margins, but it doesn’t get close to the root of the problem,” he said.

Sir Steve said the problems caused by the taper go beyond the NHS – affecting employees across multiple industries, of which seniors doctors are only the most visible – and would not be solved by an NHS-only fix.

The consultation runs until October 11.