Govt scraps 50:50 NHS pension proposal for ‘full flexibility’

The government has scrapped plans to introduce a 50:50 system for NHS staff pensions, instead offering full flexibility over the amount clinicians can put into their pensions.

Publishing a statement today, 7 August, the government also said that HM Treasury will review how the tapered annual allowance supports the delivery of public services such as the NHS.

Last month, Theresa May’s government put out a consultation proposing a 50:50 system, which would have allowed clinicians to reduce their pensions accrual by 50 per cent, as well as paying 50 per cent lower contributions. However, this was not welcomed by the British Medical Association.

Today, however, Boris Johnson’s government has scrapped those plans and is instead offering full flexibility over the amount NHS staff can put into theit pension pots. The Department of Health and Social Care (DHSC) has said it will publish a consultation on a new set of proposals shortly.

The new rules will be introduced in the next financial year, and will allow senior clinicians to set the exact level of pension accrual at the start of each year.

For example 30 per cent contributions for a 30 per cent accrual rate, or any other percentage in 10 per cent increments depending on their financial situation. This would give them room to take on additional work without breaching their annual allowance and facing tax charges.
Employers would then have the option to recycle their unused contribution back into the clinician’s salary.

Health and Social Care Secretary, Matt Hancock, said doctors should not have to worry about tax impacts if they choose to take on extra shifts.

“These comprehensive proposals will give doctors the pension flexibilities they have called for and need to make sure they are rewarded for extra work. We are taking immediate action and I hope these flexibilities will encourage our top NHS staff to fulfil the dedication of their mission: to care for their fellow citizens in time of need,” he said.

Since the introduction of the annual allowance taper in April 2016, and the lowering of the tax relief threshold from £1.25m to £1m, many consultants are penalised for continuing to pay into their pension fund.

The Treasury said it will continue to engage with the NHS, the British Medical Association (BMA) and other stakeholders as part of this process.

Commenting on the plans, Chancellor Sajid Javid, said: “This government is committed to ensuring that British people see a real difference in public services, including getting quicker GP appointments and a reduction in waiting times.

“Critical to that is introducing flexibility into the system so that our hospitals have the staff they need to deliver high-quality patient care, which is why we’ve listened to concerns and will be reviewing the operation of the tapered annual allowance. This will help to support the delivery of our vital public services.”

    Share Story:

Recent Stories

Managing volatility
In the latest Pensions Age podcast, Laura Blows speaks to Cambridge Associates head of European pension practice, Alex Koriath, about the Covid-related market volatility and how pension funds can prepare for the challenges ahead

De-risking options for pension schemes
In this latest Pensions Age podcast, Linklaters' Sarah Parkin talks to Laura Blows about the wide range of choice available to pensions schemes for the partial, or full, removal of their risks

Risk transfer opportunities
Laura Blows speaks to Lisa Purdy, Head of Fiduciary Distribution at Legal & General Investment Management and Gavin Smith, Pricing and Execution Director - UK PRT at Legal & General, about the impact of the recent market volatility on the bulk annuity and risk transfer market and the potential opportunities for the future

Bulk annuities during coronavirus
Laura Blows speaks to Just business development manager Prash Mehta about the impact of coronavirus on transactions