Pension tax problems will cause NHS staff exodus, report warns

Hope William-Smith reports

Almost half (44%) of clinical and non-clinical trust executive directors are considering or planning to leave the NHS in the next two years due to pension taxation, according to NHS Providers.

The NHS member organisation said its findings in An Unnecessary Divide: The Impact of Pensions Taxation on NHS Trust Leaders also showed 37% fewer members of staff are seeking or accepting promotions and 60% will not accept leadership roles.

A total of 35% of surveyed members of the NHS Pension Scheme said they would consider leaving the public health service by 2022, while 9% had already decided to quit their positions.

The impact of the tapered annual allowance has raised a number of concerns in the last year with many higher-paid NHS workers facing punitive tax charges for breaching the cap, which reduces by £1 for every £2 earned over £150,000.

Following fallout from senior clinicians cutting hours and refusing higher-paid shift work, HM Treasury is understood to have discussed potential solutions to the issue earlier this month. Talks are said to have included a proposal to raise the “cliff edge” tapered threshold from £110,000 to £150,000 – the point at which lower tax-free allowance start to kick in – and will be discussed further in the upcoming Budget on 11 March.

This comes after the government launched its consultation on amending the contribution rules of the NHS Pension Scheme last July in a bid to mitigate the possibility of members hitting tax allowances.

NHS Providers has now found more than three quarters (77%) of directors who are members of the NHS Pension Scheme are considering leaving it.

Respondents to the research were unanimous in the view that senior non-clinical staff should be eligible for pension contribution flexibilities while 95% also felt that flexibilities should be extended to all NHS staff.

A total of 90% of surveyed NHS workers also said they hold concerns about the impact of the continued pension taxation problems on workplace culture and morale.

NHS Providers said: “There is evidence that NHS members of staff are becoming risk-averse about taking on more responsibilities or accepting promotions as they struggle to predict whether a pay rise may affect their pension.

“This is coupled with a perception that the incentive to pursue more senior roles is diminished in light of tax arrangements which threaten to eat into the overall reward package of taking on executive posts.”

NHS workers also held concerns about the future pipeline of candidates to fill vacancies in senior posts; they agreed that the continued public discussion of those adversely affected by pensions tax law then also makes the NHS appear a less attractive place to work.

The lack of viable solutions currently available to incentivise remaining within the NHS is unlikely to change, respondents also said.

Only 31% said they plan to take up NHS England’s pledge to compensate clinicians for tax bills and interest received in 2019/20 via scheme pays. A total of 44% said they would not take up the national solution and a quarter were unsure.

NHS Providers said: “There is a widespread view that the policy being implemented, as well as future flexibilities designed to mitigate risk of senior clinicians receiving tax bills related to pensions contributions, are unlikely to lead to senior clinicians taking up additional shifts that they had dropped, or support retention of clinicians more generally in the NHS.

“Doctors working in challenging roles in overstretched services have made a lifestyle decision to achieve a different work/life balance in the context of the pensions taxation issue, which they are now reluctant to give up even when financial risk is removed.”

NHS Providers said there is a “clear need to restore the incentive for doctors to work extra shifts, and to create a fair solution for all staff affected,” and called on the government for both a change to the taper and better support for staff moving into senior roles or through pay increments with regards to annual allowance rules.

“A lasting solution to the pension problem must include a commitment to review flexibilities for lower-paid staff,” NHS Providers added. “They struggle to afford high contribution rates.”