Budget delay could fuel NHS pension crisis – comment from Tilney

29 October 2019

A recent poll by the Royal College of Surgeons of 1,890 members makes alarming reading, highlighting the continued adverse impact that pension tax charges are having on the NHS. It found 68% were considering early retirement due to pension tax charges and a further 69% revealed they had reduced their NHS working hours.

Graham MacLeod, financial planning director at Tilney, looks at the ongoing issues and what impact the Budget delay could have.

“While there is a consultation underway to make the NHS pension scheme more flexible (main proposals outlined below), with changes intended to be implemented in April 2020, as we have previously pointed out, such tinkering, while welcome, is unlikely to resolve the crisis without the scrapping of the tapered annual allowance. The latter, introduced in 2016 as a parting gift by former Chancellor George Osborne, is the root cause of the problems impacting doctors and surgeons.

“With the 6 November 2019 Budget now pulled and a new Budget unlikely to happen until 2020 following a potential General Election, the opportunity to hit the nail on the head and address this issue head on has effectively evaporated for many months, a period when the NHS pension crisis will rumble on, risking rising waiting lists for surgery. The costs of addressing this will ultimately need to be offset against the tax receipts to the Treasury arising from these pension tax charges.

“For those impacted by the tapered annual allowance, next year could see an even greater impact from pension tax charges if effective action isn’t taken, as any unused pension allowances from the previous three tax years may well have already been mopped up under ‘carry forward’ rules.

“While the thorny issue of Brexit is destined to take centre stage if a snap election is triggered today, senior medical practitioners, as well as other professionals adversely impacting by the tapered pension allowance, will no doubt want to scrutinise what the various political party manifestoes say on the issue of pension allowances and reliefs.”

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Key proposals for reforming the NHS Pension

  • Choose a personal accrual level and pay correspondingly lower employee contributions. For example, 50% accrual with 50% contributions, 30%:30% or 70%:70%
  • Fine tune this during the pension year, updating the chosen accrual when clearer on total income.
  • Ancillary benefits such as ‘death in service’ life assurance and survivor benefits would continue in full.
  • Phasing the ‘pensionability’ of large pay increases for high-earners.
  • Make the impact of Scheme Pays election clearer by including the pension debit on Annual Pension Statements so that members can see the adjustment to their pension at retirement.
  • Provide access to high quality education and information (do not constitute as financial advice).

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years.  Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.