According to new research from Wesleyan, over a quarter of doctors (29%) plan to retire by 2023 amid NHS pension taxation issues, rock-bottom morale and unmanageable workload pressure.
Of those retiring earlier than planned, one in six (14%) stated it was because they had hit their Lifetime Allowance (LTA) on pension savings.
Pension issues have been an ongoing thorn in the side of many doctors. Nearly a third (30%) of the medical professionals that Wesleyan spoke to said they had reduced their hours to minimise the risk of receiving an annual allowance or lifetime allowance tax charge.
A fifth of doctors (20%) are considering leaving the NHS Pension Scheme permanently in a bid to avoid tax charges, while a further fifth (19%) plan to strategically leave and re-join the scheme in an attempt to limit their pension growth.
Wesleyan’s research also found that two-fifths (41%) of doctors planned to continue working in some form after they start taking their pension benefits. Of those continuing to work, two-fifths (43%) plan to work in the health service, with a further one in five (19%) taking on a mix of private and NHS roles.
Meanwhile, just 18% of doctors understood the impact of inflation on their pension and retirement savings, and nearly three-quarters (71%) were pessimistic about the future of the medical profession in the UK.
Alec Collie, Head of Medical at Wesleyan, said: “Punitive pension tax is a wound in the side of our health service that has been left to fester for far too long. We need the Prime Minister and the Chancellor to overhaul the lifetime allowance and annual allowance – particularly how it works for doctors – and we need them to do it now.
“We currently have a perverse situation where, by continuing to go above and beyond for their patients, some of our most senior and experienced clinicians risk receiving what can be simply eye-watering tax bills – bills so large that we know of cases where doctors have actually had to take on significant debts to pay them. As a result, many doctors feel they need to jump in and out of the NHS Pension Scheme to try and avoid getting caught in the tax trap, leave the scheme, turn down extra shifts or even leave the profession altogether.
“Inflation is currently making this problem worse. This is due to how NHS pension growth and the annual allowance are calculated. Members of the 2015 NHS Pension Scheme, or people who are ‘practitioners’ in the 1995 or 2008 NHS Pension Scheme sections, are fortunate in that their pension pot is increased by the Consumer Price Index (CPI) inflation metric, and then 1.5% more.
“The calculations to measure ‘pension inputs’ for annual allowance purposes also account for inflation. But they use the CPI figure from the September before the tax year in question. In the current environment of rapidly rising inflation, this means that the system is increasing pension growth at a far faster rate than it is the annual allowance – ultimately meaning more risk of incurring an annual allowance charge. This is a technical problem that is clearly unfit for purpose, and needs to be urgently fixed.
“The absence of action from the government is leading to conjecture and misunderstanding around what are complex issues, and dire consequences for the workforce.
“For doctors, taking matters into their own hands by potentially leaving the NHS Pension Scheme could mean they end up with a diminished pension pot on retirement, and lose valuable benefits that the NHS Pension Scheme brings – such as the ‘death in service’ gratuity, which pays a lump sum to their families and dependents if they pass away.
“But on a wider scale, doctors are, and will continue, to be forced out of the NHS if these problems continue – something we can ill-afford as a country already grappling with recruitment and retention issues, as well as soaring NHS waiting lists.
“Doctors want to do what they do best: treat and support patients. At a time when morale is already low and the pressures are sky-high, take the worry of tax issues away and allow them to concentrate on patient care. While we wait for the change we so desperately need, it’s essential that doctors keep in mind that the NHS Pension Scheme is still one of the best in the UK, and leaving it should only be done in the extreme. Seeking specialist advice on this matter will be critical.”
Findings are based on consumer research of 293 medical professionals, conducted by Wesleyan between August and September 2022.