Doctors are preparing for an 'exodus' from the NHS If Labor cuts the tax-free amount savers can withdraw from their pension pot, Rachel Reeves was warned last night.
Two trade unions told the chancellor that any such move would lengthen the waiting list while triggering new strikes.
They also accused the government of trying to “recoup” money spent on inflation-suppressing salary increases for doctors and other public sector workers.
The ruling comes after reports that the Chancellor is considering reducing the tax-free lump sum to just £100,000.
Currently, most savers can take 25% of their pension pot when they turn 55, up to a maximum of £268,275, tax-free. Experts estimate that this move could raise £2 billion.
However, under the pension scheme introduced in 1995, NHS workers are forced to receive part of their pension pot as a lump sum when they retire.
For the most senior doctors and those with the largest pension pots, this may mean having to take over £100,000.
Doctors are preparing for an “exodus” from the NHS if Labor cuts the tax-free amount savers can withdraw from their pensions, warned Rachel Reeves (pictured)
Young doctors taking part in a rally outside Downing Street after members of the British Medical Association begin strike action over pay in June
This means many people would potentially take early retirement to avoid the lump sum they would have to accept if they exceeded this new threshold, or to prevent more of it being taxed.
Newer pension schemes introduced do not force NHS workers to take a lump sum from the pot.
Dr Sarah Tennant, pensions spokeswoman for the Association of Hospital Consultants and Specialists, said: “Cutting the tax-free lump sum will cause confusion for senior doctors in the hospital.
“While junior doctors will be able to opt out of receiving the lump sum, senior doctors will be covered by a scheme that will force them to do so.
“It doesn't take much to see how the threat of losing thousands in deferred compensation would prompt many of our most experienced physicians to avoid transitions and retire earlier than planned.”
She added: “There will be enormous anger and there is every chance it could turn into a new impetus for strike action, which is something no one wants to see.”
Young doctors protest in Whitehall, opposite Downing Street, on the first day of the British Medical Association (BMA) strike on June 27
New NHS figures published yesterday showed waiting lists stand at around 7.6 million (file photo)
“All this at a time when our NHS is in serious trouble and needs every pair of hands to get through the backlog on the waiting list.”
In March 2023, Chancellor Jeremy Hunt abolished the tax-free allowance known as the Lifetime Allowance to prevent senior doctors taking early retirement.
This means some doctors still believe they can increase their pension pot without having to face new charges.
Under Hunt's abolition of the Lifetime Pension Allowance, pension funds exceeding £1.07 million were subject to an average annual tax of £40,000.
Dr Vishal Sharma, chairman of the British Medical Association's pensions committee, said any new raid could “seriously undermine ongoing efforts to reduce waiting lists”, adding: “We hear some doctors have already postponed their retirement plans due to ongoing speculation and announcing such a move would likely lead to an exodus of our most senior doctors who were planning to retire immediately before any changes take effect.
Two trade unions have told the chancellor that any such move would extend the waiting list while also triggering new strikes (file photo)
Junior doctors and consultants on strike organized by the BMA are joined by members of the UNITE trade union on September 20, 2023.
“After doctors entered into a series of pay agreements earlier this year that began the process of restoring lost wages, recouping this money from our pensions would not only reverse that progress, but could result in a renewal of the type of litigation we have seen across the country.” NHS.
Dr Sharma added: “Doctors entered into the 1995 pension scheme receive an automatic, compulsory lump sum, which means they have no choice but to pay taxes they were not expecting.”
The warning is a major blow to the Labor Party, which in its manifesto pledged to “get control” of waiting lists by clearing them.
New NHS figures published yesterday showed waiting lists stand at around 7.6 million.
Ms Reeves is also considering introducing a National Insurance tax on employer pension contributions to help deliver on the party's pre-election promises on unused funds.
On Wednesday, economists at the Institute for Fiscal Studies said Ms Reeves needed to find £25 billion from tax rises to avoid spending cuts and meet her commitment to borrow only for investment.
Yesterday, Business Secretary Jonathan Reynolds did not rule out the possibility of adding National Insurance contributions to employer pension contributions.
John O'Connell, chief executive of the TaxPayers' Alliance, said: 'Taxpayers will be deeply concerned by the increasingly desperate nature of this government's scramble for cash.
“Workers should focus more on easing the burden on households and businesses and less on trying to squeeze every last drop out of them.”
