NHS brain drain is down to punitive pension tax changes

Niall Dickson

The UK’s National Health Service pension scheme is fast becoming ludicrous. We have reached a point where growing numbers of senior staff are either reducing their hours or leaving work altogether to avoid incurring large tax charges linked to their pensions, writes NHS Confederation chief executive, Niall Dickson.

Punitive changes to the annual allowance and the taper system are among the most significant workforce-related issues facing the NHS. When there are already severe shortages throughout the health service, we can ill afford to lose more staff, particularly some of our most senior doctors.

This should be dealt with as a matter of urgency — if it is not, we will continue to see an unnecessary brain drain from stretched services. And the problems with the NHS pension scheme extend beyond doctors and the highest earners. We need changes to pension policy to support staff at all levels and at different stages of their careers.

The pension scheme should enable staff to build up their future pensions in a way that is affordable. The contributions demanded should be flexible enough to allow them to manage financial pressures as and when they arise and to reflect the reality that, increasingly, they will continue working later in life.

A number of changes are needed, therefore, to deal with both affordability for lower earners and the tax pressures on higher earners. For most staff, the NHS scheme remains a valuable benefit, but it is vital to preserve that value. If it is managed correctly, NHS pension reform could prevent a further deterioration in an already challenging workforce position. An attractive pension plan could aid both recruitment and retention. We are confident that the forthcoming NHS workforce implementation plan will acknowledge the need for far-reaching change, but it will need the support of the health secretary and, crucially, the Treasury.

For some time, we have advocated an approach where scheme members can choose to pay a lower contribution rate, in return for lower benefits. We believe introducing flexibilities of this type will help to make sure the scheme remains an attractive and valuable benefit for all staff.

The government is considering a “50/50” approach, comparable to that in local government. This allows staff to pay half the contribution in return for half the benefit. We are also exploring how life assurance or income protection benefits could be used for those who elect to opt out of the scheme.

Although opting out may currently be the best choice for some, remaining in the scheme will be in the longer-term interests of the vast majority. Our view is that the introduction of new flexibilities will benefit all staff groups.

At the NHS Confederation, we have commissioned research on the impact of the annual and lifetime allowances in the health service and the risks to service delivery and patient care. We will use the evidence that emerges from this to shape government and wider political thinking. We have had warm words from the chancellor of the exchequer and secretary of state for health, but unless we see action soon we will continue to see a haemorrhaging of mission-critical NHS staff.

Niall Dickson is chief executive of the NHS Confederation. Follow him on Twitter @NHSC_Niall and the Confederation @nhsconfed

This article was first published in the Financial Times.

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