Govt plan to relieve NHS pension crisis to be announced

The government plans to announce an emergency plan to allow pension tax bills incurred by doctors to be paid by the government through the scheme pays option.

Initially reported by The Times, Health Secretary, Matt Hancock, is expected to order civil servants to carry out the plan to try and avoid a medical crisis by encouraging doctors to increase their hours as patient numbers increase during the winter months.

However, the plan is expected to only cover senior doctors in England.

Through the scheme pays option NHS staff are able settle annual allowance tax charges of over £2,000 by deducting the doctor’s pension pot, which the government is expected to say it will reimburse once the doctor retires, in their plan.

This would only be a temporary measure, which is only expected to include the 2019/10 tax year.

However, it does not appear as if the plan was universally well received, with Royal London director of policy, Steve Webb, describing it as “a bizarre merry-go-round” that has “one part of the public sector paying money to another in order to resolve a short-term crisis”.

He continued: “The fundamental problem here is the complex system of pension tax relief.

The failure of the government to address this issue has resulted in emergency measures having to be taken in the middle of an election campaign simply to avoid a winter crisis in the NHS.

“The Treasury could have avoided all of these problems if it had simply admitted months ago that the pension tax relief system is too complex and had abolished the tapered annual allowance altogether.”

AJ Bell senior analyst, Tom Selby, agreed, saying that the plan was “a bit of a mess”.

He added: “While political focus is understandably on averting a winter NHS crisis – and the negative headlines that would accompany this as a general election draws near – this proposal effectively means handing one particular group of workers more generous pension tax terms than everyone else.

“Those in other sectors who are also affected by the taper but aren’t being offered similar levels of compensation will understandably feel aggrieved.

“Rather than chasing sticking plaster solutions, the government should accept the taper – however well intentioned – is a bad policy and scrap it altogether. This would cost around £1bn a year, which in the grand scheme of state spending isn’t a huge price to pay.

“This should be a precursor to a more radical review of pension tax relief in the UK, with the aim of building on the early success of auto-enrolment by creating a simpler set of savings incentives that people can understand.”

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