In 2016, the then Chancellor of the Exchequer George Osborne introduced new legislation on pension savings.
A reduction in pension tax relief for high earners was designed to bring in more money for the Government without causing financial harm to the majority of the public.
The complexity of the rules around pension tax relief, however, has had serious and sometimes life changing consequences for many people working in the NHS. As such, a policy that was intended to only affect a minority is exacerbating workforce shortages within the health service and impacting on the healthcare of the entire UK population.
The medical workforce should feel supported and rewarded for their hard work. Instead, senior clinicians are being fiscally punished for their commitment to the NHS and to their patients. For example, some clinicians who have received an award have then been issued with a tax bill as a result. Others are resigning from leadership roles or not requesting payment for work to ensure that they do not exceed the threshold. This is unacceptable and unsustainable.
As a College, we’re working with our members to amplify their perspectives and to compel governments across the UK to act on this issue.
We submitted the experiences of members from across the UK to the Academy of Medical Royal Colleges (AoMRC). They combined this information with examples from other Colleges in a letter to Chancellor of the Exchequer Sajid Javid MP and Secretary of State for Health and Social Care Matt Hancock MP, calling for pension reform that goes beyond proposals for increased scheme flexibility. This letter was referred to by Chief Executive of the NHS Simon Stevens in his letter to Matt Hancock MP, asking for written permission to reimburse NHS England clinicians who are issued with pension related tax bills.
We also ran a short survey in November to gather more of our members’ experiences on this issue.
The response, and results (described in our report), have been astonishing. More than 700 members from across the UK completed the survey and confirmed the detrimental impact of the pension tax legislation on the health service, specifically in paediatrics: over half of the respondents felt that paediatric services have been reduced as a result of pension related tax bills. The effect is set to worsen as over three-quarters are likely to retire earlier than they had planned because of this issue.
Perhaps most strikingly, the vast majority could not easily find out if they might be liable for a pension related tax bill. We have received reports of members using their own money to hire an accountant, seeking certainty that they won’t accidentally exceed the pension savings threshold– only to be issued with a tax bill despite financial advice to the contrary.
Given that most of the tax bills reported by members were worth £10,000 - £19,999, with many totalling over £50,000, the uncertainty that the pensions tax legislation creates cannot be underestimated. The lack of clarity propagates low morale across the medical workforce, who feel demoralised within a health service that they have dedicated their careers to.
Understandably, clinicians are taking on less work and some are choosing to retire early. This piles up pressure on waiting lists for patients and causes cancelled procedures and ward closures.
As an interim measure the governments in England and Wales have set out plans to mitigate financial risk to senior clinicians.
We welcome action to counter the detrimental impact of the legislation as it stands on the medical workforce. Our research shows, however, that the medical workforce needs a clear system that taxes them fairly and predictably. We are therefore convinced that fundamental pension tax reform across the UK is necessary to stem the flow of skills and experience out of the health service.
As a College, we thank our members that have contributed to our work on this issue.
We call on the next Government to urgently enact pension reform and to implement a sustainable and fair solution to this avoidable crisis.