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Experts urge government to act fast to fix NHS pensions crisis

19 Dec 2019 By Jessica Brown

Health and social care secretary promises to review the tapered allowance, but critics say more immediate action to abolish it is needed

The government’s failure to overturn the tapered annual allowance for pension tax relief within the NHS is causing “major problems”, experts have warned.

Steve Webb, Royal London’s director of policy, said doctors were restricting their hours to avoid large tax bills, which is exacerbating the NHS’s ‘winter crisis.’

Earlier this year the government proposed a review of the taper and to reform the NHS pension scheme, allowing doctors to opt for different rates of contributions depending on their circumstances. 



The secretary of state for health and social care, Matt Hancock, repeated his pledge to review the tapered allowance during a speech at think tank Policy Exchange on 18 December. He said the government would “fix the pensions system so senior doctors and nurses can take on extra shifts without the fear of an unexpected tax bill”.

He added that the review would “permanently fix” the problem and promised to “create a system that works for everyone”. 

But Webb said this wasn’t enough, and called for the taper to be abolished. “All year we have been hearing of doctors who are restricting their hours to avoid the risk of large lump sum tax bills,” Webb said. 


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“The tapered annual allowance is complex and makes it very hard for taxpayers to know where they stand. The solution is to abolish the taper outright, even if this means a lower across-the-board annual allowance for all.  

“What we do not need is another review, however ‘urgent’. There is a crisis in the NHS this winter, and to respond to this with a further review is to fail to grasp the urgency of the situation.”

Issues arose in 2016 when new regulations limited the amount of money that could be paid into public sector pensions by high earners without losing tax relief. This resulted in consultants working fewer shifts to avoid breaching the £1.1m lifetime allowance for pension saving, which would put them into a higher tax bracket.

Higher earners can see their limit reduced from £40,000 to as little as £10,000, and in some cases can face a tax bill that wipes out additional earnings.  

Professor Andrew Goddard, president of the Royal College of Physicians, agreed that fundamental reform was needed as soon as possible. “The new government must sort out a long-term fix for the pensions issue,” he said. 

“The temporary solution was welcome but, given the impact of the pensions tax on individual consultants and on the NHS, this is a matter of urgency.” 

Rachael Hall, independent financial adviser and pension transfer specialist, said the taper should be abolished and called it an unfair, unhealthy tax that had “demoralised and disincentivised” the NHS workforce. 

“Tax should be fair and proportional, both of which the taper is not,” Hall said. “Government workarounds have caused further distrust, confusion and have been divisive, weighted in favour of senior clinicians. 

“Scrapping the taper should be the first action our new government takes to protect NHS services, which will be the first step to rebuilding the trust lost and creating a healthy pension tax system that is applied fairly.”

Carrie MacEwen, chair of the Academy of Medical Royal Colleges, said: “The government’s failure to act quickly on this pressing issue has had a direct impact on the care patients receive. We know many of the most senior doctors simply left the service or dramatically cut their hours to avoid the punitive tax rules. 

“We have welcomed the interim measure agreed last month by NHS England and will work with the government to find a long-term solution. But this is a complex taxation issue and not just about the NHS. So whatever solution is found, it’s unlikely to be simple.’

Niall Dickson, chief executive of the NHS Confederation, said the review will help to improve matters, however. But he warned against a protracted process, and stressed that all NHS staff should be consulted. 

“The pensions debacle preventing senior clinical staff from taking on extra shifts has further intensified the workforce crisis,” he said. “The action announced will go some way to alleviating them. [But] it is important that the review of the pensions taper should not delay a solution and should include all staff, not just senior clinicians.”

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