Active Chartered Financial Planners has praised the latest move by the government to reform public sector pensions to alleviate the staffing crisis occurring in the NHS.
The firm, which advises on retirement planning to many professionals in the North East and North Yorkshire, has previously voiced its concern by writing to to both local MP Dr Paul Williams and Chris Skidmore, Minister of State for the Department of Health and Social Care, about the annual and lifetime allowances on pensions, and the impact they have on the NHS.
In the latest announcement, Health Secretary Matt Hancock has pledged to overhaul the regulations to ensure that senior medical professionals can work extra shifts without being penalised on tax.
Prior to 2012, the lifetime pension allowance was £1.8 million, and the majority of senior medical professionals would only reach or come close to that allowance close to retirement age. However, since this allowance was lowered to £1 million these individuals have been reaching this limit in their late 40s or early 50s, leading them to retire and return to work in the capacity of consultant, costing the NHS more in the long term.
In financial year 2010 -2011, the annual pensions allowance sat at £255,000, before being reduced to £50,000 between 2011 and 2014. It now has an upper limit of £40,000, which is ‘tapered’ further for higher earners. Recently, many higher earning NHS professionals have reached and exceeded the allowance, due to numerous Saturday shifts and longer hours, and this has resulted in some doctors being hit with tax bills of up to £80,000. This has caused many to say they will not work the extra hours, as they are concerned about their tax situation next financial year.
Paul Gibson FPFS, Cert II (MP & ER), Director & Chartered Financial Planner at Active Chartered Financial Planners, said: “As a pensions professional, I applaud the government for listening to the calls from the NHS and announcing these reforms. The current situation has caused a crisis within the NHS and was going to lead to further problems for the UK in the future. This is why we joined the NHS and called on the government to address the need for reform.
“In my letters, I offered suggestions, including allowing NHS staff to partially opt in to their current pension scheme, and building more slowly towards the cap, as has was floated recently by the Prime Minister and appears to be the route they have chosen, or to nominate a spouse or partner to have their pension pot topped up by the excess contributions. The latter would also go some way to help alleviate the current pensions gap substantially, which often sees one partner retiring with a significantly higher pension than the other.
“By offering NHS workers more flexibility, we will see a win-win situation for both those who work within it, and those who need to use it.”