Almost a quarter of GP partners have reduced their workload to avoid ‘punitive’ tax charges on their pensions, equating to 4 million lost patient appointments in England alone, a BMA survey has found.
Ahead of the Spring Budget, the union has sent a letter to the Government urging it to amend rules around the annual allowance (AA), which restricts the amount of tax-free pension growth allowed each year.
It has warned that the current system creates a steep ‘tax cliff edge’ that discourages GPs and consultants from maximising work hours.
The standard AA is currently £60,000 but since 2016 some individuals have instead been subject to a lower tapered AA, the BMA has said.
When this standard threshold is breached, a tax charge applies on the amount of pension growth exceeding the limit. However, the taper is a mechanism whereby this allowance decreases when doctors’ earnings exceed certain thresholds.
In some cases, an additional £1 of taxable earnings can result in additional AA tax charges of £22,500 typically with no additional pension benefit, the BMA has calculated.
The letter sent to the chief secretary to the Treasury, Darren Jones MP, calls for the AA taper to be abolished. It also reveals the findings of a survey carried out in February, and which received 5,000 respondents, that highlight the effects of the ‘disproportionate’ pension tax on doctors’ working hours.
A total of 23% of GP partners who responded said they have cut regular workload this year due to the tapered AA, with reductions averaging 1.7 sessions per week. A further 21% of GPs have reduced other remunerated work (e.g. out-of-hours work), 18% have reduced additional cover sessions (i.e. for holiday and sickness cover), and 16% have reduced additional funded service provision at their practice this year due to the tapered AA.
Meanwhile, 24% of consultants have also reduced their waiting list initiative (WLI) sessions, which equates to a potential loss of around 3.2 million hours of WLI work in England, or around 1,900 full-time equivalent consultants’ worth of work. Taking into account other hours consultants have also said they have cut, such as regular overtime, it represents a decrease in almost 10% of existing consultant capacity in England.
The AA taper ‘results in thousands of doctors being left with little choice but to reduce their hours or turn down additional work to keep their earnings below this limit’, BMA pensions committee chair Dr Vishal Sharma wrote in the letter.
And he said despite the BMA’s continuous lobbying on this, with no change announced in the Autumn Budget, it is creating uncertainty that ‘is continuing to drive behaviour which is reducing NHS service delivery at a time of surging patient demand.’
For example, the survey results showed that 68% of all respondents (both GPs and consultants) reported that the tapered AA will limit or entirely prevent them from taking on additional overtime in 2025/26 if nothing changes.
‘The pension taxation system continues to create perverse and unintended consequences that are preventing senior doctors from maximising the amount of care they can provide to patients creating concerns being raised before,’ Dr Sharma said.
‘At a time when the Government is committed to decreasing waiting lists and saving general practice this situation cannot continue. The BMA recommends removal of the AA taper altogether to maximise the hours and work that doctors can do’.
The BMA has also pointed out that the situation is exacerbated by three other factors:
- doctors not knowing the value of their pension savings until after the tax year has ended. With the penalties for exceeding the limit being so severe, it means many doctors take a cautious approach and reduce their work even if ultimately, they are not then affected by the tapered AA
- ‘unacceptable’ delays and errors by the NHS Business Service Authority affecting remedial as well as ‘business as usual’ pension savings statements.
- retired doctors being disincentivised to return to working for the NHS, or returning only on very reduced hours because of concerns at being hit with tax charges.
Dr Sharma’s letter, also copied to health secretary Wes Streeting, went on to request a meeting ‘to ensure that this situation can be rectified’.
‘We’re urging the Government, ahead of next week’s Spring Statement, to urgently address this head on, by removing the annual allowance taper. This would be one of the quickest and most cost-effective ways of increasing NHS capacity whilst still ensuring fairness for the taxpayer as higher earners would still have limits on tax relief via the standard annual allowance,’ Dr Sharma added.
