NHS Pension Scheme: Tapered Annual Allowance

David Linden Excerpts

Tuesday 2nd April 2019 Westminster Hall

[Paul Masterton]

The hon. Gentleman raises a good point. Our constituencies share a health board. The examples of people who work for NHS Greater Glasgow and Clyde show exactly the consequences and knock-on effects.

One surgeon contacted me to tell me that he was hit with a tax bill of £62,000 because he received a national award. People who receive a bonus or a pay rise can find themselves with a whopping tax penalty as a consequence. Rigid pay and pension rules in the NHS mean that their ability to mitigate the issue is pretty much non-existent, certainly compared with people in the private sector, because there is not the flexibility to reduce contributions or request cash in lieu of pension if there is a danger of breaching the allowance. The only option, as we have heard in Members’ examples, is to opt out of the scheme altogether or drastically reduce working hours. This issue is becoming a huge driver not only of early retirement, which in itself is extremely serious, but of enforced reduced working hours. That is having an impact on NHS care and creating lost capacity. Waiting times, which are a problem in various areas across the UK, are hit because these perverse rules mean that consultants refuse the overtime that is needed to help clear the backlog.

The investigation by the Financial Times found that the issue had increased the risk of delays in cancer diagnosis in some parts of the UK and lengthened waiting times for procedures such as hip replacements. Critical areas such as intensive care and radiology are also being affected. One consultant said that about 50 fewer patients were being seen per week in the cancer clinics they cover, as a result of doctors turning down extra shifts.

A consultant who lives in my constituency contacted me following receipt of a tax charge of £29,000, despite doing no work outside the NHS. He told me that he will now have to drop a session of clinical work to try to ensure that it does not happen again, and that he is actively considering early retirement, having reluctantly started to reach the conclusion that there is no incentive for him to continue his career beyond the age of 60. He has been forced into that position by the clear unintended consequences of the pension system.

[David Linden (Glasgow East) (SNP)]

I congratulate the hon. Gentleman on securing this debate; the interest today shows that there is probably support for a Back-Bench business debate. He is absolutely right to highlight the huge financial penalties that people are incurring. One of my constituents in Barrachnie is looking at a £15,000 bill, which he got at the end of January. That is not helpful. He has already told me that he is planning to retire early. Surely these examples only make the case to the Government that they need to take action.

[Paul Masterton]

I thank the hon. Gentleman for raising another specific case. I hope the Minister will bear in mind the added weight of evidence.

Another of my constituents, who has worked as an NHS constituent for 14 years at the Queen Elizabeth University Hospital in Glasgow told me that he is employed on a 40-hour per week full-time contract and provides eight hours per week of additional clinical work, making 48 hours in total. He does not do any private practice outside the NHS, but he was hit with an unexpected bill of nearly £17,000 as a result of the tapered annual allowance. The only way the consultant can avoid those charges is to reduce his income below the various thresholds, and the only way he can reduce his income is to reduce the amount of work he does for the NHS. He has told me that he has no desire to do that and would happily volunteer to do extra work occasionally at weekends to tackle waiting lists or fill gaps in the service, but the tax implications make that impossible and he has already stopped doing any extra work.

Another consultant from East Renfrewshire with 16 years’ experience—eight as a consultant—told me that he was actively declining extra work to support stretched services in order to avoid the tax penalties. That means that he does not apply for the discretionary points that are awarded for additional work that is taken on above the normal daily remit, such as developing new services, research and teaching. As the hon. Member for Glasgow North East (Mr Sweeney) said, that impacts not just on the daily running of services, but on the development of a culture of excellence within the NHS.