Pension Tax Rules Cutting NHS Capacity, BMA Warns

The British Medical Association (BMA) has urged the Treasury to reform pension tax policies to enable doctors to undertake extra work and help cut NHS waiting lists. The association argued that tax charges on additional earnings are impacting doctor recruitment and retention. 

A recent BMA survey of more than 5000 doctors found that taper rules have reduced NHS capacity by almost 10% over the past year, due to consultants and GPs reducing their work commitments to avoid additional tax burdens. This has exacerbated waiting list pressures, according to the association.

Impact of Pension Taxation

In a parliamentary briefing, the BMA explained that doctors’ pension saving allowances are limited in each year before additional tax charges apply. The taper reduces the standard annual allowance (AA) for pension savings when earnings exceed specific thresholds.

Taking on extra work, such as initiatives to clear waiting lists, can trigger this tapered annual allowance. According to the BMA, its “punitive nature” creates “a tax cliff edge” that can result in extreme charges. At its most severe, earning just £1 over the threshold can result in an additional tax bill of £22,500.

A June 2024 survey of BMA members showed that 71% of all respondents indicated that without reforms to the tapered AA, they would be prevented or limited in their ability to take on additional overtime. The new survey, conducted between 18 and 26 February this year, showed “this has sadly come to fruition,” the BMA said. The 5172 respondents included 3914 (76%) consultants, 907 (18%) GPs, 668 (13%) GP contractors (partners), and 351 (7%) SAS doctors.

Thousands of Consultant Hours Lost

Among consultants surveyed:

• 21% reduced regular overtime this year, averaging 1.4 fewer sessions per week.
• 24% reduced ad hoc waiting list initiative sessions, averaging 5.1 fewer hours per week.
• 16% switched to part-time work due to the pension rules, averaging 1.9 fewer sessions per week.

A full-time consultant typically works 10 sessions per week. The regular overtime reductions equate to a potential loss of 3500 consultants in England. Adding ad hoc session reductions, the lost capacity equals around 5400 full-time consultants. 

If replicated across the wider workforce, this would represent a 9.3% reduction in total consultant capacity available to the NHS in England to tackle waiting lists, the association stated.

“Absurd Situation”

Dr Vishal Sharma, chair of the BMA pensions committee, called the situation “absurd”. Despite the government’s commitment to reduce waiting lists, “doctors are being forced by complex and unfair pension tax rules to turn down or reduce extra work,” he said in a press release.

GP partners are also affected. Nearly 23% reduced their regular workload this year due to the tapered AA, with reductions averaging 1.7 sessions per week. “This implies a potential loss of around four million GP partner appointments in England this year alone,” the BMA said.

In an open letter to the Chief Secretary to the Treasury, Sharma urged the government to announce the removal of the AA taper in Wednesday’s spring statement. “This would be one of the quickest and most cost-effective ways of increasing NHS capacity, whilst still ensuring fairness for the taxpayer, as higher earners would still have limits on tax relief via the standard annual allowance,” he said.

Sharma warned that with patient demand outpacing available doctors, removing the taper would maximise the amount of work doctors can do and be “a huge step forward” in tackling NHS waiting lists.

Dr Sheena Meredith is an established medical writer, editor, and consultant in healthcare communications, with extensive experience writing for medical professionals and the general public. She is qualified in medicine and in law and medical ethics.