The National Health Service (NHS) is helping doctors avoid large tax bills by paying their contributions in cash, instead of directly into their retirement funds, it has been revealed.

According to a Financial Times report, around 10 NHS trusts have offered to pay cash contributions, an offer with is not normally possible under current NHS policy, in the hope of encouraging them to not retire early to avoid the tax bill.

The introduction of the tapered annual allowance in April 2016, and the lowering of the tax relief threshold from £1.25m to £1m, has meant that some GPs see no benefit in continuing to pay into their pension fund.

In January, it emerged that nearly a quarter of a million NHS workers opted out of the pension scheme in the last free years.

Furthermore, the NHS paid £34.7m in tax charges in 2016/17 after thousands of its staff breached pension savings limits, according to data disclosed to the FT by the NHS.

York and Harrogate NHS trusts are two of the bodies offering the cash payments, the report said.

Speaking in January, Health Secretary Matt Hancock said he is in discussions with the Chancellor to try and change the tax rules, and said it was the “biggest concern I have raised with me” by GPs.

Last month, a joint report from Nuffield Trust, Health Foundation and The King’s Fund said that urgent measures must be taken, such as the introduction of partial transfers to stop senior NHS staff from leaving the health service.

Despite this, Aegon pensions director, Steven Cameron, believes that the tax issue must be looked at for everyone, and not just for one profession.

“The limits are most likely to affect people who are, or have in the past been, members of a defined benefit pension scheme. These are now much rarer in the private than the public sector, but many in the private sector may have built up a defined benefit entitlement in the past,” he said.

“This means future employer or personal pension contributions can push many people, not just NHS consultants, above the lifetime allowance and incur a tax penalty.”

Share Story: