Question to the Department of Health and Social Care:

To ask the Secretary of State for Health and Social Care, what assessment he has made of the potential merits of removing or reducing the NHS pension annual allowance or increasing its limits to improve the retention of experienced senior hospital doctors and GPs.

Experienced senior hospital doctors and general practitioners who decide to become members of the NHS Pension Scheme (NHSPS) benefit from one of the best available defined benefit occupational pension schemes giving them a very good retirement income. Work done by the Government Actuary’s Department has concluded that the NHSPS remains good value and the “scheme pays” facility offers an efficient mechanism for meeting any tax liabilities.¹

The annual and lifetime allowances are important fiscal measures to ensure income tax relief on pension contributions is fair and sustainable. In context of the 1995 final salary section of the NHS Pension Scheme, clinicians who use up the full £40,000 annual allowance would see their annual pension increase by around £2,500. Clinicians who reach the £1 million lifetime allowance limit can expect an annual pension of around £44,000 payable at age 60 and increasing with inflation, plus a tax free lump sum of £132,000. Pensions of this size provide substantial financial security in retirement.

Note:

¹This work considered the length of time a member subject to the annual allowance would need to receive pension in retirement to recover both their own contributions to the NHSPS and the annual allowance tax charge for the year in question. Although the exact period depends on a number of factors including level of pay, section of membership, age at retirement, amount of tax free cash selected at retirement and the means of paying the AA tax charge (scheme pays or in cash) in most cases the period is less than half the expected life expectancy in retirement.