Ministers mulling 50/50 solution for NHS scheme
On the go: The chancellor and health secretary are reportedly considering introducing greater flexibility to the NHS pension scheme, in a bid to stave off a wave of early retirements without changing tax rules.
Philip Hammond and Matt Hancock have been mulling the introduction of so-called 50/50 accrual for the scheme, where members contribute half the amount to accrue half the defined benefit, according to NHS sources speaking to The Guardian.
This system is already available under the Local Government Pension Scheme, and could allow senior doctors to work the extra shifts the health system needs without triggering the annual allowance tax charge.
Waves of senior doctors are thought to be retiring early or reducing their hours as a result of the high marginal tax rates they face for working extra shifts, and the British Medical Association has recently warned of staff walkouts if no action is taken.
However while Cabinet ministers are reportedly keen on the idea, pensions experts have been less so.
Royal London's director of policy and former pensions minister Sir Steve Webb last week called solutions like 50/50 "sticking-plaster" solutions that do not address the poorly thought-out tax policy at the root of the problem. He said the "fundamentally rotten" annual allowance taper should be abolished, even if this means setting a lower overall annual allowance level.
Scrap ‘rotten’ taper altogether, former pensions ministers tell chancellor
Pressure is mounting on the chancellor to take action on NHS pensions, as two former pensions ministers on Wednesday called for the “fundamentally rotten” tapered annual allowance to be scrapped.
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