Prime Ministerial candidate Liz Truss has pledged to relax GP pension tax charges in a bid to stem the exodus of doctors from the NHS, it has been reported.
The proposals for NHS pension reform are part of draft plans that would come into force if frontrunner Ms Truss won the Conservative party leadership contest, according to The Telegraph.
Earlier this month, Ms Truss said she will ‘need to sort out’ the issues with doctor pensions if she becomes the next Prime Minister.
Now, The Telegraph has revealed that she has pledged to ‘halt the NHS doctor exodus’ and that this could include a relaxation of the lifetime allowance, which pushes GPs to reduce their hours or retire early to avoid large tax bills.
The newspaper reported over the weekend that under the ‘radical’ draft plans, GPs will be able to continue working after they reach the lifetime pension cap ‘without paying taxes that mean thousands choose early retirement’.
It added that GPs could be allowed to voluntarily stop paying into their pensions once they reach the cap, but Pulse understands this is already the case.
It also remains unclear whether the lifetime allowance tax charges could be abolished altogether.
The lifetime allowance is the maximum amount you can put into a pension pot without triggering an extra tax charge. If a pension pot exceeds the allowance, it is then taxed heavily when you retire.
The Telegraph also reported that Ms Truss’s pension plans include ‘cutting red tape and dealing with issues in the pension and tax system that currently act as barriers for people wanting to return’.
It said that she is considering plans to introduce a national ‘retire and return’ scheme, which could include relaxing pension rules that limit retired doctors’ part-time earnings and reducing lengthy retraining courses for those wishing to return.
The reforms could see the scrapping of a rule that bans returning retired doctors from earning more from their pension and pay combined than they would earn working full time, it added.
The newspaper said Ms Truss is considering plans put forward by the House of Commons Health and Social Care Committee last month, which said it is a ‘national scandal’ that GPs are having to work less or leave their jobs altogether due to NHS pension rules.
The pension reform plans aim to stop doctors from retiring early and entice those who have already retired to return, with better doctor retention hoped to help tackle the Covid backlog and growing waiting lists, according to The Telegraph.
It said that Ms Truss’s top three priorities if she were to beat rival Rishi Sunak to the leadership post in Downing Street would be to cut NHS waiting lists, cut taxes and broaden the UK’s energy supply.
BMA pensions committee chair Dr Vishal Sharma told Pulse that it is a ‘huge step forward’ if a Tory leadership candidate is aiming to ‘end the pensions tax trap’ for doctors but that it is ‘essential that the correct solution is implemented’.
He said: ‘The punitive pension tax rules extend beyond the lifetime allowance with the annual allowance being completely unsuited to pension schemes such as that of the NHS.
‘This, compounded by the impacts of spiralling inflation, will result in significant numbers of retirements unless addressed.’
The BMA ‘firmly believes that the best long-term solution is a tax unregistered scheme for higher earning doctors’ like that implemented for judges, he added.
Dr Sharma said: ‘While we are glad to hear that the candidates are taking the workforce crisis seriously, it is essential that this time they implement the correct solution.
‘We have already outlined the issues and solutions to Government and the BMA will ensure that the next PM follows through not only on their commitment to end the pension tax trap but to produce a proper workforce strategy for the whole NHS.’
Ms Truss’s campaign team did not respond to requests for comment and clarification.
The Department of Health and Social Care (DHSC) told Pulse that the NHS pension scheme is ‘one of the best available’ and that it has already solved issues with the tapered annual allowance, but that it is monitoring retirement patterns and hours worked by staff.
Ms Truss has said that she has a ‘clear vision’ based on the ‘shared Conservative principles of low tax, freedom and sound economic management’.
Previously, Ms Truss also said she wanted to empower healthcare staff on the frontline more by removing ‘some of the central diktats’ and having ‘fewer levels of management’.
Meanwhile, it was also recently revealed that Ms Truss called for patients to be charged for GP visits and for a 10% cut to doctor pay in a 2009 paper published when she was director of a think tank.
Doesn’t matter what you do wont change my plans to foxtrot oscar asap.
D’oh! It’s not the Life Time Allowance that’s the problem – it’s the Annual Allowance. Doomed to fail. Taxi!
The obvious solution (assuming the ridiculous punishing AA/LA limits stay), is to allow GPs the flexibility to decrease their pension contributions when required, rather than the idiotic “all in or all out” Hobson’s Choice that caused this totally avoidable mess in the first place.
Desperate
Well I would consider working longer if the lifetime allowance was scrapped.
For me that is the biggest consideration
The problem is the LTA. Full stop.
With scheme pays I can pay the stupid annual allowance tax.
The big problem is the LTA.
And I would consider working longer as well.
It needs to be put back to the £1.8m value which seemed sensible.
We do not have a sensible Government.
One wonders what their endgame is?
But James Mather you are giving up huge chunks of your pension by using scheme pays, possibly more than you would lose through the tax on the LTA, depending on your age. It is a very bad idea.
A flexible scheme is totally unfair – because it means in effect the solution to pensions tax is simply to give us smaller pensions.
If only 50% of my income is pensionable, then my pension when I retire is only 50% of what it should have been. Why should I give up half my retirement income?
Annual allowance is the real problem here, and if you’re using scheme pays to pay it, please please get advice from a specialist accountant on how it will affect your pension in the future.
Annual allowance and LTA both require reform since we all know they essentially tax our pension three times – once in terms of paying for pseudogrowth which penalises doctors the year following a high inflation rate for no gain in pension value – with no remedy or increase in annual allowance when it works the other way.. Secondly in either paying in advance for a benefit we may never receive in one of two ways: Scheme Pays where you will be penalised over and above the alleged rate of pseudogrowth with CPI + interest OR paying in today’s money for a benefit which is worth ‘x years of inflation growth’ less than when you paid for it AND AGAIN with an artificially reduced LTA which is designed to erode the value of our pensions even further. There will be an optimal ‘pull out’ point for everyone with 1995 and 2008 contributions, particularly with McCloud, however, the purposefully delayed publication of actual pension position drags almost everyone into a tax liability before they’re even aware that they have one.