Many doctors may leave the NHS or cut their hours rather than face big tax bills as a result of the freezing of the pensions lifetime allowance, the British Medical Association (BMA) has warned.
The amount people can save before tax charges kick in will be held at its current level of £1,073,100 until April 2026.
Pensions experts have previously described the lifetime allowance as a “stealth tax” and warned more of middle Britain, including NHS doctors, could be caught in the tax net.
Chairman of the BMA pensions committee, Dr Vishal Sharma, said: “Ahead of the Budget, we surveyed our members to gain their views on the impact of a freeze of this kind.
“Over 8,000 doctors took part in the survey. A staggering 72% of responders to the question ‘If the level of the lifetime allowance is frozen in this year’s Budget, what impact if any will this make on your plans around retirement?’ said they were more likely to retire early.
“Freezing the pension lifetime allowance is a bad decision and is creating the perfect storm, forcing an exhausted workforce – many of which are already planning to work fewer hours – to make some very tough decisions such as working less hours or leaving the NHS long before they would naturally retire.
“If they don’t, they will face huge pension taxation bills because the NHS pension scheme is not flexible enough to allow doctors to vary and manage their contributions. They simply cannot keep working and face huge pension tax bills as a result.”
Doctors were also asked: “If the level of the lifetime allowance is frozen in this year’s Budget, what impact if any will this make on any plans you might have around changing your working patterns?”
More than six in 10 (61%) said they would be more likely to work fewer hours or work part-time.
Dr Sharma continued: “The potentially disastrous impact of this on the NHS and patient care is unthinkable, especially at the current time when the impact of Covid-19 and the backlog of patient care is so acutely felt.
“Today’s move by the Chancellor is nothing short of a punitive tax on our hard-working doctors and it is simply unacceptable.”
Baroness Altmann, a former pensions minister, said: “The decision to freeze the lifetime allowance may seem like a handy way to bring in a bit of extra tax revenue, but it may well damage confidence in long-term pension planning.
“When people are saving for a pension they need some certainty about what lies ahead. Instead, we have seen constant changes in the pension rules and limits, which have often undermined people’s ability to plan for future retirement resources.”
She said rules around the lifetime allowance have led people such as doctors to retire early, “since working longer can mean they lose money as they may exceed the lifetime allowance”.
Baroness Altmann added: “It is really time for a root-and-branch reform of pensions and the rules.
“I hope that the Government will soon decide to review all the rules around pension contributions, as well as the taxpayer incentives provided. The constant tinkering, rule changes and reversals of recent decisions is not a sensible or sustainable way to run a successful pension system.”
Enjoy the convenience of having The Sunday Post delivered as a digital ePaper straight to your smartphone, tablet or computer.
Subscribe for only £5.49 a month and enjoy all the benefits of the printed paper as a digital replica.Subscribe