Permanent solution required for NHS pensions

Health Secretary Jeane Freeman has again called on the UK Government to find a permanent solution to the pension taxation issue impacting vital NHS staff and frontline services.

In a letter, Ms Freeman urged UK Chancellor Sajid Javid to take decisive action to ensure pension and taxation rules no longer undermine delivery of frontline health services for the people of Scotland and other UK nations.

As a result of UK Government pension taxation rules, highly experienced staff can face unexpected additional tax liabilities. This has led to some staff having to reduce their hours or retire earlier than expected. 

In response the Scottish Government introduced a temporary opt-in policy for all affected NHS staff in November 2019 to ensure crucial services are maintained as demand on the health service continues to increase.

However, this interim measure is due to come to an end on 31 March 2020 with the end of the current financial year, and a permanent solution must be found by the UK Government.

The text of the letter to the Chancellor is as follows:

31 January 2020

In advance of the UK Government’s planned budget on 11 March I am writing to strongly urge you to take the decisive action necessary to ensure that pensions taxation rules no longer undermine delivery of frontline health services for the people of Scotland and other UK nations.

The rules around Annual Allowances (AA) and Lifetime Allowances (LTA), together with the taper, continue to have a serious impact on NHS service delivery and staff, with clinicians across the NHS having to make unanticipated changes to their working commitments to avoid large and unexpected tax charges related to pension savings. These impact on the ability to deliver and maintain front line services, and on the sense of value of our staff.

The Scottish Government has taken action to mitigate the impact of pensions taxation rules on staff and services within the current financial year, introducing a Scotland-wide REC scheme for all affected NHSS staff.

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 pensions 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.

I am copying this letter to the Prime Minister, the Secretary of State for Health and Social Care and devolved administrations.

JEANE FREEMAN

Background:

The temporary policy introduced by the Scottish Government gives eligible NHS staff the option to get their employer pension contributions paid to them as part of their basic pay, providing staff with an alternative option to restricting their hours in order to reduce financial penalties.

The rules regarding pension taxation are wholly reserved to the UK Government and any changes to the NHS pension scheme require the consent of HM Treasury.