Government raises annual allowance for pensions

As reported by the BMA, senior doctors have welcomed the end to the NHS ‘pension trap’ for the majority of doctors, following a pledge to increase the annual allowance announced in the government’s Spring 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.

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% intended to leave their roles ‘in some capacity’ over the next 12 months, with 38% 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% backed taking industrial action should the government fail to listen to consultants’ concerns.