HCSA warns 50-50 pension proposal won't head off NHS crisis

HCSA has issued the following statement in response to plans announced by the Secretary of State for Health and Social Care to consult on a so-called “50:50 option” for NHS pension contributions.

HCSA Pensions Committee chair Dr John West said: “This half-hearted measure will do little to tackle the problems facing hospital doctors.

“Encouraging individuals to halve their pensions contributions to try to avoid collision with the fiendishly complicated tax system effectively punishes them for a pensions crisis not of their making.

“The so-called 50:50 option will leave many facing a stark choice between slashing their retirement contributions in half, and eroding their pension, or gambling that they will not fall foul of the annual allowance and taper thresholds.

“If the government has the capability to administer a 50:50 option, there can be no objection to offering the flexibility of, for instance, a 90:10 or 70:30 option for those for whom this would work better.

“In addition, if deferred employer pension contributions are not reimbursed directly, it represents an even greater erosion of hospital doctors’ reward package following a decade of effective pay cuts as well as significantly increased employee pension contributions.

“It will still leave NHS medical staff, whose gross pay would increase if they activated the 50:50 facility, facing a tax Russian roulette of thresholds and tapers as their salary rises.

“It will not address the tax “cliff edge” of £110,000 of earnings, at which point individuals are at higher risk of unexpected bills through the tax taper.

“It will not resolve the issue of arbitrary thresholds crossed as a result of pay rises, career progression or greater responsibilities, leaving thousands of doctors facing unpredictable five or six-figure tax bills.

“Therefore it will not resolve the defensive behaviour of hospital doctors who are reducing work and responsibilities as a precautionary measure, ahead of potential charges that in some cases can take their effective tax rate to over 100 per cent of income.

“It is akin to prescribing a sticking plaster for a patient who needs urgent heart surgery.

“While fiddling with the NHS Pensions system may allow policy-makers to be seen to be ‘doing something,’ only the Treasury can truly resolve the issue.

“HCSA is clear that fundamental reform of the pensions tax system is the only way out of this crisis.”