HCSA welcomes effective end of pensions taper for majority of hospital doctors - but warns many will still face unpredictable tax bills

HCSA has welcomed changes announced in the Budget which mean that the pensions taper will be effectively scrapped for most doctors in April - meeting a longstanding call - but warned the battle is not yet won because seniority, pay progression or extra responsibilties could still trigger big unexpected tax bills.

The Chancellor today unveiled significant changes to the thresholds governing hospital doctors’ pensions contributions which mean that far fewer will trigger the so-called annual allowance taper. This means the amount which they can contribute without receiving a tax bill will increase for many to the full £40,000, significantly reducing tax bills of those who exceed this figure.

However, HCSA attended a post-Budget briefing on the changes with officials from the Department of Health and Social Care and raised concerns that, while welcome, this would not prevent many doctors receiving sizeable tax bills at many points during their career because of the way pay increases trigger large “growth” within sections of the NHS pension scheme.

HCSA continues to press for a solution which will address this issue.

Key items affecting hospital doctors' pensions in the Budget:

  • Income threshold (not including pensions contributions) to trigger assessment for the annual allowance taper will rise by £90,000 to £200,000.
  • Adjusted income threshold (including pensions contributions) used to calculate reductions to tax relief annual allowance via the taper will rise by £90,000 to £240,000
  • New lower bottom end to taper which will see annual allowance reduced to £4,000 for those with highest adjusted incomes
  • Proposals to introduce a scheme of employer recycling of pension contributions appears to have been dropped: “Proposals to offer greater pay in lieu of pensions for senior clinicians in the NHS pension scheme will not be taken forward” - however the DHSC says that this could still be pursued at employer level
  • Lifetime allowance for pensions to rise in line with CPI to £1,073,100

Responding to the Budget, HCSA pensions lead Dr Sarah Tennant (pictured) said: “We are pleased the Chancellor has responded to calls from HCSA and others with a policy to remove a huge number of hospital doctors from the ill-conceived annual allowance taper.

“It feels like the beginning of the end of a farcical period where hospital doctors have had to spend huge amounts of time focusing on bad tax policies instead of getting on with their day job.

“But we have always maintained that the litmus test will be in the impact on doctor behaviour. Removing the taper will reduce issues for many doctors, but it will still leave many others, who are progressing through the pay scale or who take on vital additional roles or responsibilities, facing unpredictable tax bills because of the multiplier effect within the NHS pension scheme.

“So we need to be realistic - this is an extremely welcome step, but it will not solve the whole problem.

“We must also tackle the underlying medical staffing gaps which have been so badly exposed during this crisis. HCSA will be on hand to support our members against any employer which uses this tax change to drive doctors to overwork because of systemic short staffing.”