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NHS leaders have appealed to chancellor Nadhim Zahawi to make “urgent changes” to pension tax rules for doctors as concerns grow that soaring inflation is hampering efforts to tackle record waiting lists.
NHS Employers, part of the NHS Confederation that represents organisations employing 1.4mn people across the health sector, wrote to Zahawi on Monday to relay “mounting concern” that rising inflation could worsen the health service’s workforce crisis because of its effect on doctors’ pensions.
Soaring inflation is a particular problem for members of the NHS retirement scheme, owing to the way the consumer price index is factored into calculations of the annual growth in their defined benefit pensions. Savings that exceed a yearly limit, known as the annual allowance, are subject to tax charges.
The rapid increase in inflation over the past year has added to the risk of the NHS’s highest earners, including surgeons and GPs, receiving large tax bills for allowance breaches.
In the letter to Zahawi, Danny Mortimer, chief executive of NHS Employers and deputy chief of the NHS Confederation, wrote: “We must bring to your attention the very real risk that rapidly rising inflation will deter even more senior doctors from working additional hours — that is, unless urgent changes to pension tax calculations are brought in this year.”
“The issue of rapidly increasing inflation causing a spike in pension growth is preventing senior medical staff from carrying out the additional work that the NHS desperately needs them to undertake,” he added.
With more than 6.4mn people waiting for routine treatment, doctors would need to work extra evening and weekend shifts “for years to come” to clear the backlog, Mortimer told the Financial Times, adding that the pensions of “thousands” of senior medical staff could be affected by rising inflation.
The letter, which was also sent to health secretary Steve Barclay and Commons health select committee chair Jeremy Hunt, comes a week after the committee warned that the NHS was facing its “greatest workforce crisis”.
Noting that persistent understaffing posed a “serious” risk to patient safety, the MPs urged the government to take “swift action” over the “national scandal” of doctors reducing their hours to avoid pension tax bills.
The letter marks the latest in a series of calls from NHS chiefs and doctors’ groups for deeper reforms to pension tax rules, which have become more pressing for the health service amid government efforts to restrict pension tax relief for high earners.
In 2020-21, the UK Treasury was forced to alter the “tapered” annual allowance after doctors turned down additional work to avoid triggering pension tax bills.
“How many more warnings does this government need about the most experienced doctors being forced to walk away from extra shifts, reduce their hours, or leave the NHS altogether due to pension taxation?” said Dr Vishal Sharma, pensions committee chair at the British Medical Association, the doctors’ trade union.
“As the BMA has repeatedly highlighted, it is within the gift of the Treasury to fix this by urgently amending the Finance Act to prevent senior doctors from being forced to retire,” he added.
The Treasury said: “We want to make sure doctors spend as much time as possible treating patients — which is why the pensions we provide are some of the most generous available, meaning that fewer than 1 per cent of pension savers face an annual allowance charge.”
“We keep all taxes under review,” it added.
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