Pensions tool for GPs to help navigate unfair inflation calculations

The British Medical Association (BMA) has launched a tool for GPs to give more clarity over changes in inflation and pensions leaving them liable for potentially significant tax charges

Charges for exceeding the tax-free annual allowance (AA) are based on deemed pension growth – not contributions.

Only growth above inflation should be tested against the annual allowance but because of the anomalous use of two different values of inflation in the calculations, the dramatic rise in CPI over the last year could severely impact doctors, in particular GPs – leaving them facing significant AA charges.

Meanwhile, if inflation stabilises next year as predicted, those who have already faced these unfair penalties this year that were based on “artificial” pension growth will see this growth largely disappear and hence will have been taxed in a benefit that they will never actually receive.

NHS Employers has said it is building a tool to estimate GP pension growth for release later this year. However, given the rapid rise in inflation – announced at 9% on Wednesday – the BMA has launched its own tool to highlight the perverse way AA charges are calculated, and allow individual GPs to plan accordingly.

In an April survey from the BMA around two-thirds of GP respondents said the financial impact of pension taxation would influence their thoughts about leaving the health service. With England alone having lost the equivalent of more than 1,500 full-time fully qualified GPs since 2015, the BMA says it is vital that the government acts to reform these damaging pension rules that threaten to vastly exacerbate the workforce crisis, leaving even fewer GPs to care for patients.

Dr Vishal Sharma, BMA pensions committee chair, said:

“Punitive pension tax rules that leave senior doctors facing large and unexpected penalties for staying in work, are a huge disincentive for them to continue in the NHS, providing much-needed care for patients, even if they want to.

“And the system is not only unfair, but incredibly complex, meaning doctors will not realise they have a large bill coming their way until they receive it. This creates a great deal of uncertainty and anxiety for hard-working doctors when they are already dealing with unprecedented pressures.

“With current rises in inflation, this can result in further punitive tax charges. We have released this tool for GPs so that they can have as clear a picture as possible and make informed decisions for the future.

“We cannot tell doctors what these decisions should be, and some may well continue to work regardless of the impact on their pensions. However, with a long-standing GP workforce crisis, the government must urgently act to prevent hard-working doctors from taking what they might feel is the only option of either reducing their hours or retiring entirely to prevent being unfairly penalised for their dedication to the health service and their patients.”