Fears that medical practitioners will desert the NHS due to pension tax bills right as the winter influx hits have driven the government to announce an emergency measure to help fund the costs.
The tapered annual allowance has drawn particular criticism in recent months amid reports doctors are choosing early retirement or fewer shifts rather than be faced with effective tax rates on combined income and pension contributions of up to 90 per cent for the highest earners.
The ‘scheme pays’ method will be used by the NHS pension scheme to cover the tax bills incurred by doctors this year under plans due to be unveiled today, but the government will refund any reduced pension that would be due at retirement.
Quilter head of retirement policy Jon Greer says that the move would be “an effective admission that the pension annual allowance taper is a broken policy that is too unpredictable and punitive”.
However, commentators have noted that giving NHS workers special treatment could be seen as controversial, given significant numbers of other public sector professionals like judges are also breaching the taper, and are calling for it to be scrapped entirely.
Royal London policy director Steve Webb says: “The plan for the NHS to pay the tax bills of doctors amounts to a bizarre money-go-round with one part of the public sector paying money to another in order to resolve a short-term crisis. The fundamental problem here is the complex system of pension tax relief.
“The failure of the government to address this issue has resulted in emergency measures having to be taken in the middle of an election campaign simply to avoid a winter crisis in the NHS. The Treasury could have avoided all of these problems if it had simply admitted months ago that the pension tax relief system is too complex and had abolished the tapered annual allowance altogether”.
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