NHS Pensions and Staffing

Philippa Whitford Excerpts

Wednesday 13th July 2022 Commons Chamber

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests as a practising NHS hospital doctor, although I am not personally affected by the issues I am about to raise.

I think we would all agree that following the pandemic, the NHS is facing unprecedented challenges in delivering patient care. The current demands on the system are too high to be met by the existing workforce and resources alone, and while the Government rightly seek to increase the NHS workforce by training more doctors, nurses and other frontline clinical staff, it is equally vital that we retain the existing workforce. Simply put, losing senior and experienced staff at this time would be an unmitigated disaster for the NHS and the patients it serves.

One of the biggest threats to the retention of the most senior and experienced NHS staff is the punitive and unfair interplay between long-standing Government pension taxation policies and the NHS pension scheme. Those policies, and the punitive financial penalties that result from them, will cause many senior NHS workers to take drastic steps such as reducing hours, leaving leadership roles or taking early retirement. These pension penalties will result in senior and long-serving NHS workers aged 59 or 60 potentially losing over £100,000 from their pension pot if they delay retirement by one year, rather than retiring this year. That is resulting in senior and experienced NHS workers being advised by actuaries and accountants to reduce their working hours in order to avoid being hit by huge pension tax bills that will see them working for little pay, or in some cases no pay at all.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

Obviously, I too was a doctor until recent years.

This is an issue for all four health services across the UK, and is taking away people with the knowledge, skills and experience to not just look after patients but teach. Is the underlying problem not that when this policy was introduced in 2015, the talk was about preventing tax avoidance? It is not possible to play games with a final salary scheme. It was never open to doctors to play games with their pension, and therefore it is simply the wrong policy for the wrong group of people.

[Dr Poulter]

The hon. Lady is absolutely right. There were some further unintended consequences of the Finance Act 2004, which I will come to in a moment, but doctors, nurses and healthcare professionals cannot chose the rate at which they contribute to their pensions—they have to contribute at a fixed rate. There is no choice, so unintentionally, we find ourselves in a situation where senior healthcare professionals are facing punitive, eye-watering annual charges on their pensions worth tens of thousands of pounds. That cannot be right.

--- Later in debate ---

[The Economic Secretary to the Treasury (Richard Fuller)]

Thank you very much, Mr Deputy Speaker.

Let me begin by thanking my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) for securing the debate and for the points that he has raised. I also note the contributions of the hon. Members for Central Ayrshire (Dr Whitford), for Strangford (Jim Shannon), for Llanelli (Dame Nia Griffith), for Carmarthen East and Dinefwr (Jonathan Edwards) and for East Dunbartonshire (Amy Callaghan), who made, forcefully, the point that this is an issue that affects all parts of the United Kingdom.

Because these issues are complex and my hon. Friend rightly set them out in full in order to put them on the record, I am rather short of time, so, if I may, I will move rather quickly in responding to some of my hon. Friend’s recommendations. Let me add that I shall be happy to follow this up with other Members who have spoken if they want to raise specific constituency points.

I think that everyone present has noted the pressures on our NHS. Indeed, before taking on my new role, I spent a considerable amount of the last six months with my own GPs. I know that the issues relating to pressures on GPs are complex, including the overall questions of compensation and burnout, and my hon. Friend rightly mentioned the issue of abuse of NHS staff, which has occurred to a shameful degree over the last six months and which no member of our health service should ever have to deal with.

However, my hon. Friend focused on the issue of pension tax and the NHS, and made three specific recommendations. The first concerned the differential use of CPI figures, and he was right to raise that issue, because it is the spike in inflation that has laid bare some of the problems in the way in which calculations are made. The issue relates to the disparity between the CPI figure used for uprating the opening value of a member's benefits and the CPI figure used to assess revaluation in public service schemes. This effect is particularly notable in the NHS pension scheme, where accrued benefits are adjusted upwards each year by CPI plus 1.5%—which, to be fair, makes it one of the most generous pension schemes available.

I understand that this difference in figures will lessen the headroom that scheme members have in their annual allowance calculation. That may cause more members to exceed the annual allowance, and cause those who already routinely exceed it to exceed it by more, with the result that some may receive annual allowance tax charges. The British Medical Association has asked the Government to amend the Finance Act 2004, so that the CPI figures used in uprating the opening value and the figure used for revaluation in public service schemes are the same. However, there are some further issues that must be considered in this discussion, which my hon. Friend may not have mentioned.

First, the Government have a duty to balance support for all pension savers across the United Kingdom. The use of September CPI to measure inflation in the year before the tax year is a well-established feature that is used across the tax system. Any changes would impact all pension savers, not just NHS staff.

The current approach provides certainty to individuals at the start of the tax year about what their opening pension value will be for annual allowance purposes. I appreciate that, for those with a defined benefit pension alone, this certainty may not be seen as much of an advantage. However, for others across the country who may have some defined benefit accrual but are now saving into a far less generous defined contribution scheme, this certainty allows them to plan their finances and pension contributions for the coming year.

[Dr Whitford]

Will the Minister give way?