New NHS pensions fix 'could trigger another tax charge' later on

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The government has reportedly proposed a short-term fix to the NHS pensions row, which has impacted hospital waiting times.

Doctors will be able to pay the pension tax bills they get next year out of their pensions; the NHS will then top up their pension pots before retirement. The emergency measure will only apply for the 2019-20 tax year, according to the BBC.

But the proposal has been heavily criticised in the pensions industry. 

As the NHS will top up pensions to compensate for tax bills, "ironically, this could trigger another tax charge if the total paid into the pension in a future year exceeds the allowance then", said Steven Cameron, pensions director at provider Aegon.
“Rather than rearranging the deckchairs, what we need is a fundamental review of how pension allowances work, not just for the NHS, so they reward good savings behaviour and never penalise taking on extra work."

Tom Selby, senior analyst at investment platform AJ Bell, called the latest tweak "a bit of a mess".

He said: "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."

He called on the government to scrap the annual allowance taper altogether. "This would cost around £1 billion a year, which in the grand scheme of state spending isn’t a huge price to pay," he said.

The government is still running a consultation on increased flexibility in the NHS scheme, a proposal which doctors have already said was not enough.

Meanwhile in Scotland, health secretary Jeane Freeman has announced that from 1 December, NHS staff will have the option to have their employer pension contributions paid to them as part of their basic pay.

The British Medical Association has given the Scottish plan a "cautious welcome" but said it will continue to push for UK-wide tax reforms.

What is your view on the latest proposals in the NHS pensions crisis?

Ros Altmann
Steven Cameron