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Pensions and taxes

Pensions also feature prominently in the decision to retire early for many doctors. Legislation changes include inclusion of all taxable income, and tapering of the annual allowance. The annual allowance is a threshold which restricts the amount of pension growth a person is allowed each year before tax charges apply. This means huge tax bills for many consultants, which increase the more they work.

Senior doctors who have devoted their lives to caring for patients in the NHS now find themselves being forced to reduce their work commitments, often against their wishes, by pension taxation legislation that imposes large annual tax bills upon them. A recent BMA survey described how 40% will have to stop taking part in initiatives to reduce waiting lists due to an adverse effect on their pension. In many cases, it means doctors are effectively paying to go to work.

The RCOG believes that the best way to resolve this is to reform pension taxation. This reform should include the removal of the tapered annual allowance. The NHS should also introduce a scheme that can be readily understood by its employees. The way the current scheme works, and particularly its interaction with the 1998/2008 final salary schemes, is extremely complicated and only fully understood by a small minority of doctors and advisers.

It is important to balance this long-term aim with short-term solutions. Unless immediate steps are taken to mitigate the worst effects of existing pension rules, doctors will continue to be financially penalised for taking on extra work. The NHS needs to find a way to enable, not penalise doctors in supporting their NHS Trusts to provide additional theatre sessions and clinics, in order to reduce waiting lists and improve patient care.

The RCOG worked with a pensions and tax expert to come up with ideas to address the pension tax issues in the short to medium term and has shared these with NHS England in the first instance for consideration.