Scottish health secretary urges Chancellor to fix the pensions tapered annual allowance issue

04 February 2020

Jeane Freeman, the Scottish health secretary, has requested that the Chancellor of the Exchequer, Sajid Javid, finds a permanent solution to the issue of the pensions tapered annual allowance issue that is currently affecting doctors working in the National Health Service (NHS).

Pensions Expert reported that Ms Freeman wrote to Mr Javid and encouraged him to “take decisive action” to stop the negative outcomes associated with the pension and taxation rules for senior clinicians across Scotland and the UK, and advised that the issue needed to be fixed prior to April, and the start of the new tax year. She added that if the chancellor does not find a lasting resolution then the Scottish government would find solutions of its own.  Ms Freeman also urged Mr Javid to utilise the Budget to be held on 11 March 2020 to offer a permanent solution to the problem.

She said:

“Considerable effort has been expended to date in trying to offset the very real consequences for NHS staff and services of UK government tax policy.

 The Scottish government will continue to act to mitigate the harmful impact of pension taxation rules on NHSS staff and on frontline service delivery from April 2020 should this prove necessary. It is, however, clear that a permanent solution is urgently required and can only be offered by your department.

 It is incumbent upon you to take the opportunity of the March Budget to fully and finally remedy the situation and allow our NHS staff to get on with delivering care without fear of the consequences. These concerns are echoed across the entire UK, and I urge you to act.”

 The tapered allowance is causing doctors to stop contributing to pension schemes, to cut their hours or even to retire earlier than initially planned, in order to avoid receiving large tax bills. The rules mean that for every £2 of adjusted income above £150,000 the annual allowance reduces by £1, but the minimum reduced annual allowance that an individual can receive is £10,000.

The Scottish government implemented a temporary measure for NHS staff by giving them the option to have their employer pension contributions incorporated into their basic pay. In England, the government pledged to cover the tax bills of doctors for the 2019-20 tax year but this is due to cease on March 31 2020 and no permanent fix has been introduced. The interim measure in England has been criticised by experts.


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