HM Treasury  

MPs call on Treasury to scrap tapered allowance

MPs call on Treasury to scrap tapered allowance

MPs have called on HM Treasury to deal with doctors' pension tax issues by scrapping the tapered annual allowance.

In a debate in parliament today (June 26), a group of cross-party MPs called on the Treasury to respond to the debate on how doctors are being penalised by the tapered allowance.

Concern about doctors' pensions has increased since the introduction of the tapered annual allowance in 2016.

This gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

The tapered annual allowance means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

In May, Health and Social Care secretary Matt Hancock announced the government would consult on proposals to offer senior clinicians a new pensions option, which will allow them to build their NHS pension more gradually over their career without facing large tax charges.

Plans to introduce a 50:50 option would allow clinicians to "halve their pension contributions in exchange for halving the rate of pension growth", the Cabinet Office and Department of Health and Social Care stated.

But MPs have called on the Treasury to take over and instead scrap the tapered annual allowance.

In the debate, MPs revealed how doctors in their constituencies were worried that the 50:50 proposal would not work and instead wanted to see the abolishment of the tapered allowance. 

Conservative MP Robert Syms said: "We were originally told that the Treasury would respond to doctors’ issues but instead the health department has stepped up and taken this on.

"Unless these pension tax issues are addressed by the government there will be a devastating impact on the NHS and dental services."

The MPs told the health minister, Stephen Hammond, doctors across the countries were refusing to take on more work to try and avoid a large tax bill, which can often be three to six figures. 

Dr Philippa Whitford, MP for the Scottish National Party, said: “GPs who had no intention of retiring early are being driven out of work due to the threat of high tax bills from the tapered allowance.

“People are expected to commit to a pension in their early 20s but by the time they reach retirement the goalposts have been moved and new rules have been introduced so they have no choice but to bail out.”

Some MPs even suggested scrapping the tapered allowance for all public sector workers. 

In a speech this month, Ian Linden, technical manager of pensions at James Hay, argued that although calculating the tapered annual allowance was "extremely complicated" the number of people actually affected by it was minimal.

Mr Linden said: "In 2016 only 16,500 individuals told HM Revenue & Customs that they had an annual allowance charge to pay due to the tapered annual allowance.