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Budget pensions tax plan fails to remove perverse incentives to reduce NHS work

11 March 2020

 

The BDA has warned changes announced in today’s budget have failed to completely remove perverse incentives to reduce NHS clinical hours for the highest earners


The plans unveiled by Chancellor Rishi Sunak raise the Lifetime Allowance from £1.055m to £1.073m. The continued existence of this allowance acts as an incentive for those on more modest incomes to retire early.

 

The Annual Allowance standard level is set to remain at £40,000. From April 2020, the earnings level at which the taper applies has increased, with threshold Income up from £110,000 to £200,000, and adjusted Income up from £150,000 to £240,000.
 
For those whose Annual Allowance is tapered, the minimum level is down from £10,000 to £4,000.
While the government claim plans will take 98% of consultants out of the Annual Allowance taper, and 96% of GPs, they do not take forward proposals for greater pay in lieu of pension contributions in the NHS.
 
Recent BDA surveys have indicated half of dentists (50.3%) were actively considering reducing NHS hours to avoid exposure to pensions tax charges.
 
The Chair of the BDA's Pensions Committee Paul Blaylock said:


“For the last three years we have consistently raised the problems caused by pensions tax in the provision of NHS dentistry. 


"The Budget announcement to take many individuals out of the taper to the Annual Allowance will be welcome by many who have faced such tax charges in recent years. However it does not completely remove the problem that many higher earners are disincentivised to work. It also does not remove the perverse incentive to retire early for many in the NHS. 
 
"It is imperative that public service pension schemes allow workers flexibility to build up lower pensions in exchange for a lower pension contribution.”
 

Getting a fairer deal on pensions tax

Dentists working under the NHS Pensions Scheme can face large tax charges, due to the complexity of the current system. We are calling for greater flexibility within the NHS Pensions Scheme to ensure dentists get a fairer deal.