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Government reveals temporary fix to NHS pension crisis to avert staffing crisis

Joanna Faith
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Joanna Faith

The NHS could temporarily pay doctors’ tax bills to avoid understaffing during the busy Winter period.

Medical staff have reportedly been turning down extra shifts because they were being hit with large tax bills as a result of changes to pension contribution rules.

However, under new proposals, staff will be able to use money from their pension to pay tax bills incurred because of overtime and the NHS will then top up their pots at a later date.

This emergency fix is only expected to apply for the 2019/20 tax year.

Dr Chaand Nagpaul, council chair of the British Medical Association (BMA) said: “These proposals under discussion could, if properly implemented, provide the respite needed to enable significant numbers of doctors to increase the work they are doing, giving vital patient care at a time of unprecedented demand.

“However, we don’t yet have important details about how the such a scheme will work; details that are crucial to the BMA and to the tens of thousands of doctors that we represent in order to provide the necessary reassurance that doctors can take on additional work without this resulting in any financial penalty.”

The problems stem from changes to the amount people can put into their pension tax-free.

The annual limit was in excess of £250,000 as recently as 2010/11, but it has been cut dramatically and now stands at just £40,000.

For higher earners an additional ‘taper’ brings the allowance down further to just £10,000 for individuals with total earnings of £210,000 or more.

The policy change has created strain in key services including the NHS, where senior clinicians are facing huge tax bills if they and their employer pay into a pension above the tapered annual allowance. Many surgeons are turning down overtime shifts as a result, with some considering early retirement.

Commenting on the news, Gary Smith, chartered financial planner at wealth manager Tilney, said: “This is a very welcome development, which provides a temporary solution to what is rapidly becoming a national crisis. Unfortunately, it is not providing a long term solution and this measure is simply kicking the can down the road to next year. There is also the danger that this will lead to calls for similar treatment from other senior public sector workers.

“Whichever government we get next month needs to address the issue of NHS pensions as a matter of urgency.”