New government plans ‘will not resolve’ pensions crisis

11 Sep 2019 By Siobhan Palmer

Unions warn patients may come to harm unless more drastic solutions are offered to resolve impasse affecting NHS consultants 

New proposed reforms may not be sufficient to solve the growing pensions crisis affecting the NHS and other parts of the public sector, unions and commentators have warned.

The Department of Health and Social Care (DHSC) yesterday opened a consultation on plans to allow high-earning NHS doctors and consultants greater flexibility in how they make pension contributions. It aims to alleviate problems that have seen some consultants declining extra work to avoid large tax bills. 

Health secretary Matt Hancock said the new plans would give senior clinicians “more control over their pension, their future and their retirement than at any other point in NHS history”.

The proposals, described by the DHSC as “the most flexible NHS pensions ever”, would allow employees to individually control how much their pension pot grows each year, allowing them to make lower contributions if they chose. 

The consultation also outlines an option for workers to ‘top up’ their pension pot at the end of the tax year, when they are clearer on their total earnings. This would help them avoid breaching their tapered annual allowance limit. 

The tapered annual allowance, which applies to all public sector pensions, sees earners with an income above £110,000 face restrictions on the level of tax relief on their pension contributions. As a result, senior NHS staff were advised by the British Medical Association (BMA) in May that cutting their hours would be the only way to avoid effectively paying to work given the potential tax penalties.

The ongoing dispute has seen many senior NHS staff cut back on shifts or take early retirement to avoid financial penalties, adding to the NHS’s staffing crisis. 

In July, the government was warned it had “three or four weeks” to address the problem, with hospitals having to delay operations and struggling to fully staff shifts. 

The BMA said it was “encouraged” by the government consulting on the problem, but warned that “while the options within this consultation will help alleviate the issues, they will not resolve it”.

“To succeed, we need to see NHS employers doing their part and recycling all of the employer contributions,” said Dr Phil De Warren-Penny, deputy co-chair of the BMA consultants committee. “If they don't, it's still an effective pay cut for doctors for doing extra shifts.”

De Warren-Penny described the tapered annual allowance as “the real heart of the problem”, and called for its removal, as well as an end to annual and lifetime allowances on public sector pensions. 

He said doctors could return to working extra shifts “only when these [allowances] are removed”, adding: “It cannot wait for the current turmoil in parliament to be resolved and it cannot wait until doctors have been forced to reduce their hours so much, or leave the NHS altogether, that patients come to harm.”

Subject to the response to the consultation, the DHSC said it aimed to introduce the new proposals in time for the start of the new tax year in April 2020. 

But Niall Dickson, chief executive of the NHS Confederation, which represents health service organisations, said more work was needed to hone the proposals. “Today’s revised consultation offers some hope, but we continue to urge the government not just to add more flexibility, but to scrap the tapered allowance altogether,” he said.

“The repercussions for patients will only worsen without reform and the most effective way to do that would be to get rid of the taper.

“We need a comprehensive set of reforms that does not penalise hard-working professionals, many of whom have devoted their careers to public service in the NHS. This must include flexibilities for all staff.”

The NHS crisis is one of a number of disputes that have arisen since the new public sector pension scheme was introduced in 2016. 

Legal challenges have been brought against the government by doctors, teachers and firefighters, arguing that the changes are discriminatory on the grounds of age as younger employees have no choice but to participate in the scheme. 

In response to a landmark Supreme Court ruling in favour of firefighters, the government said any remedy to the issue would apply across the board, and it is engaging in an employment tribunal to agree a remedy. 

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