Pension tax: Hancock urges doctors not to retire and pledges to “fix” crisis by 2020
BMJ 2019; 366 doi: https://doi.org/10.1136/bmj.l4634 (Published 10 July 2019) Cite this as: BMJ 2019;366:l4634
England’s health secretary, Matt Hancock, has urged doctors not to take early retirement because of punitive pension tax charges and has promised to consult with the profession and the Treasury to fix this “very serious” problem by the start of the next financial year.
In response to growing concern about the impact of the charges, the government announced a plan in June to allow senior clinicians to halve their pension contributions to avoid large tax bills.1 The NHS pension scheme does not currently offer any flexibility in the rate at which pensions build, and the highest earning consultants contribute 14.5% of their pensionable pay each month.
But last week NHS trusts reported that the plan was not working,2 as significant numbers of key clinical and managerial staff were declining to work extra hours because of the financial penalties involved. A recent poll of senior staff by NHS Employers3 found that more than four in 10 had reduced their additional work because of the impact of pension tax charges, and a small proportion had retired.
Appearing before the Commons Health and Social Care Committee on 9 July, Hancock acknowledged that more action was needed besides the “50:50” accrual proposal.
He said that the government would shortly publish a consultation paper with open questions on how to resolve the problem by 2020. In the meantime, he urged doctors not to vote with their feet.
“For people who are affected by the lifetime allowance, I would strongly recommend that they take no precipitate action in terms of early retirement, because we are going to fix this problem,” he said. “And for people affected by the annual allowance, I understand the problem. But we need to make sure that we find solutions urgently so that people can do the work that they want to do and that the NHS needs them to do.”
Constructive dialogue
Hancock said that he was in constructive dialogue with both the BMA and the Treasury and that he was “absolutely determined to solve the problem.”
“The BMA make a case that the [“50:50” proposal] doesn’t solve all of the problems—I’ve heard that case. The consultation will include open questions as to how best to solve this problem, so everybody will be able to respond.
“I’ve spoken to the chief secretary of the Treasury [this week], and this is an urgent priority that we’re taking forward. We are committed to resolving it by the new financial year.”
He was also grilled on comments made by Boris Johnson, the Tory leadership candidate, that he may halt the government’s sugar tax if he becomes the next prime minister, subject to a review of the evidence.4 Hancock has backed the sugar tax, which came into force in April 2018, and had been widely expected to extend it to sugary milk drinks in an upcoming green paper on prevention.
But Hancock was less committal in front of the committee, saying, “The case for extension was always due to be considered by the government in 2020. When the so called sugar tax was first introduced we always said we would look at it again in 2020, and I commissioned the evidence base from the CMO [chief medical officer] in anticipation of that consideration being given next year.
“The facts on the ground haven’t changed; however, it’s always best to base your judgments on the best available evidence.”