Has the Chancellor Solved the Doctors' Pensions Crisis?

Tim Locke

March 11, 2020

Chancellor Rishi Sunak increased income thresholds in the Budget to help solve the doctors' pension crisis – but is it enough?

Some higher-earning doctors have been reducing their hours to escape punitive tax bills as their pension pots exceed tax-free allowances caused by a 'taper' to their pensions.

'Supporting Hard-working Doctors'

Mr Sunak told the Commons: "I've listened to concerns from all sides of this house that the pensions tax system is preventing doctors from taking on more hours," and he said he was going to "significantly reduce the number of people that the tapered annual allowance affects".

"I'm increasing both taper threshold by £90,000 pounds, removing anyone with income below £200,000 pounds, based on their vital work for the NHS that will take around 98% of consultants and 96% of GPs, out of the taper altogether at the same time I'm reducing the minimum annual allowance to £4000 pounds, which will only impact those with incomes above £300,000 pounds.

"This is a £2 billion pound commitment that supports our hard-working doctors."

'He Has Listened'

The British Medical Association (BMA) responded on Twitter saying the "increase in the threshold income to £200,000 (or £240,000 adjusted) demonstrates he has listened to our mounting evidence, and for the vast majority of our members means that they will no longer be ‘paying to go to work'.

"We still believe that the fairest and most effective long-term solution to this crisis would be to remove the annual allowance from defined benefit pension schemes, such as the NHS pension scheme."

The BMA said it was preparing a full response to the announcement. In a statement, BMA Pensions Committee Chair, Dr Vishal Sharma, said: "In the coming days we will be considering our full response to the Government’s announcement and raising those issues that remain unresolved. For example, it is essential that the recycling of employer contributions is mandated for those NHS staff forced to leave the pensions scheme as a result of pensions taxation. In addition, it is vital that these staff can retain their death in service and ill-health retirement benefits."

Editor's note, 12th March 2020: This article was updated to include additional BMA comments.

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