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Will the Budget Bring Good News for the NHS Pension Crisis?

Since its introduction in 2016, the tapered annual allowance has become a huge issue within the dental and medical industries. In order to avoid hefty tax bills and actually get a higher pension, many healthcare professionals have had to cut back on work, depriving the public of knowledgeable and experienced experts and contributing to rising waiting times for surgery.

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 

The story so far

This pension allowance issue has become such a headache that the British Medical Association (BMA) has called for reform and approached the NHS to propose alternative solutions to the pension allowance issue.

In fact, after the budget confirmation, the BMA and the Royal College of General Practitioners (RCGP) joined forces in a letter to Chancellor Rishi Sunak urging him to include reform on this tax law and resolve this public issue.

The current iteration of the tapered annual allowance is causing high-earning dental and medical professionals to choose between practising and providing for their patents or dodging an inordinate tax bill. The ideal solution would allow doctors and dentists to freely practise without worrying about incurring tax debts, but one has yet to be presented.

What are we expecting from the budget?

The Treasury has confirmed they are discussing how to resolve this pension crisis and that their review will be included in the budget considerations debuting in March. This will be a welcome announcement.

Previously, the idea of raising the income threshold used in tapered annual allowance calculations from £110,000 to £150,000 was floated. But, as critics argue, this isn’t a feasible long-term solution and doesn’t actually address the issue at the root of it: that doctors are being forced to pull back professionally so they aren’t punished financially.

NHS chief executive Sir Simon Stevens also previously proposed that the government pay off the tax bill for any NHS doctors that reduced their hours so they could return to work, but that was months ago and further clarification has yet to be made.

The only true solution according to the BMA, and I am inclined to agree, is to do away with the tapered annual allowance completely.

Stay up to date

Along with everything else set to be addressed in the budget, the potential for a solution to the pension crisis makes this upcoming statement a very interesting one. It’s worth working with a professional once the statement is made to ensure your financial plan is adjusted accordingly.

To stay up to date with the latest pension news and announcements, be sure to subscribe to our newsletter and include NHS Pension Announcements as a topic of interest.

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