‘Disingenuous’ pension proposals will not fix NHS staffing crisis

The government’s proposals, announced in a consultation published on August 28, would see an existing suspension on the application of rules around “retire and return” workers extended. 

The rules, which ordinarily require suspension and abatement of pensions for returning workers who exceed certain thresholds, were originally suspended in March 2020 in a bid to make up a potential staff shortage resulting from the Covid-19 pandemic.

The suspension was due to be lifted in October this year, but the government has now proposed an extension, meaning the rules would not be reapplied until March 2023. 

The reality is that this policy only affects a small number of doctors seeking to return post-retirement, and it does nothing to prevent the exodus of senior consultants and GPs who are retiring from the NHS due to absurd punitive pensions tax charges

Vishal Sharma, BMA

It said this was necessary in case the winter sees another spike in coronavirus cases that further depletes staff numbers. However, industry commentators have criticised an absence of permanent measures, arguing that the staffing crisis will worsen unless pensions tax rules are changed.

A staffing crisis

Retirements in the three months to April this year were around 50 per cent higher than in the same period across the past five years, with the surge in claims leading to the NHS Business Services Authority, which administers NHS pensions, falling behind on payments.

The British Medical Association warned, however, that the worst is yet to come, as punitive pensions taxation rules incentivise GPs and consultants in particular to leave the service, rather than extending their employment and incurring higher taxes.

The BMA has argued for some time that pensions taxation rules should be amended, a suggestion echoed by the Policy Exchange think tank, both of which have called for the relationship between the consumer price index and the annual allowance in public sector pensions to be revised.

The BMA has also called for the creation of a tax-unregistered NHS scheme such as that introduced by the Ministry of Justice to tackle staff retention issues in the judiciary, though the government has specifically ruled out this proposal.

The issue has gained added focus due to the ongoing Conservative party leadership contest, with the BMA criticising changes to the tapered annual allowance made during Rishi Sunak’s tenure as chancellor.

Liz Truss pledged at a hustings event to “sort out” the issue of pensions taxation, while a spokesperson for the Sunak campaign has similarly said that the former chancellor would “continue to support” NHS staff should he become prime minister — although neither candidate has provided specific proposals to fix the problem.

Retire and return proposals

In its new consultation, the Department for Health and Social Care proposed measures that would extend the suspension of rules mandating pension abatements for returning staff. 

Ordinarily, there are three principal restrictions placed on members who retire and return, each of which has pension implications. The first of these is the “16-hour rule”, according to which staff in the 1995 section of the NHS Pension Scheme who retire and return must work 16 hours or less in the first month after retirement, and those who exceed this limit see their pension benefits “temporarily suspended” until their working hours have appropriately reduced.

The second rule concerns members with special class status — chiefly nurses, physiotherapists, midwives and health visitors who were members of the scheme before March 1995, and who were eligible to retire at age 55 rather than 60 with no actuarial reduction in their pension. 

Normal rules require an abatement of that pension, if these individuals return to work before the age of 60 and their pension plus salary exceeds their pre-retirement income.

The final restriction applies to 2008 and 2015 scheme members who draw down a portion of their benefits and continue working, of whom abatement requires that they reduce their pensionable pay by 10 per cent “upon each election to draw down benefits”.

The government said it was right that abatement should apply under “normal” circumstances to ensure fairness to all scheme members and protect the public purse, and denied that the potential reintroduction of the rules would “force returning [special class status] members to retire”.

“However, the response to the Covid-19 pandemic has placed unprecedented pressure on the NHS workforce,” the consultation explained, and the suspension of the rules “has been an important means of generating extra workforce capacity from partially retired staff”.

DHSC secretary Steve Barclay said: “The country is hugely thankful to all the retired staff who returned to support the NHS and the public during the pandemic. This winter will be challenging too and we are putting in place the necessary preparations to support the NHS while it continues to deliver first-rate care to patients.

“As part of this we are now consulting on extending temporary changes to the NHS Pension Scheme, which have so far allowed highly skilled retired staff to return to the workforce without having their pension benefits affected.”

Proposals are ‘completely disingenuous’

Commentators gave the consultation a lukewarm welcome, pointing out that — though not themselves damaging — the proposals would not do anything like enough to end the crisis.

BMA pensions committee chair Dr Vishal Sharma welcomed the continued suspension of the “illogical” rules, adding that the BMA supported “the abolition of these arrangements”.

“However, the reality is that this policy only affects a small number of doctors seeking to return post-retirement — namely psychiatrists with ‘mental health officer’ status — and it does nothing to prevent the exodus of senior consultants and GPs who are retiring from the NHS due to absurd punitive pensions tax charges,” he said.

Sharma criticised the suggestion that the consultation’s proposals would have a “meaningful effect” on waiting times and patient experience as “disingenuous”, as the proposals do not address “punitive taxation rules”.

“In the short term, the BMA is clear that we need urgent changes to the Finance Act to fix issues caused by sky-high inflation, while the long-term solution must be to introduce a tax-unregistered pension scheme for senior NHS staff, similar to that introduced for the judges to address their own recruitment and retention problems,” he argued.

He also highlighted that the existing suspension of the rules the DHSC proposes extending was due to end in October, arguing that it was “completely negligent” of the government to have delayed making the suspension permanent.

“It is inevitable that in the intervening period many psychiatrists will have taken the decision to retire and not return to the NHS,” Sharma said.

Quilter’s NHS pensions expert, Graham Crossley, likewise criticised the consultation for merely looking to extend the rule suspension as opposed to making permanent changes, arguing it “does not go far enough”.

“Another short-term extension only leads to worry and uncertainty for NHS staff. Government needs to see sense and permanently end the abatement rules, which will lead to more staff being retained within the NHS, more income tax receipts for government, and might even encourage other staff to return from retirement to help tackle the backlog,” he said.

Quilter obtained figures using a Freedom of Information Act request in January, showing that almost 7,500 doctors and nurses could suffer pension penalties once the Coronavirus Act powers expire, potentially forcing them to leave the service. 

“The NHS is facing a number of headwinds, but they are compounded by issues surrounding NHS pensions. This results in healthcare workers suffering penalties on their pensions, or not being given adequate time to file complicated pensions tax paperwork, when they have other things front of mind like helping the health service to get back on its feet,” Crossley said.

The DHSC declined to comment on these criticisms.