HM TreasuryJun 26 2019

MPs call on Treasury to scrap tapered allowance

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MPs call on Treasury to scrap tapered 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.

"In reality this allowance is only affecting a small number of people and the furore and publicity that the British Medical Association has created around this issue has been blown out of proportion."

He added that if parliament caved in to pressure and introduced legislation to change the tapered annual allowance for doctors then all other public sector workers would want the same treatment.

Mr Hammond called on doctors’ to respond to the consultation on the 50:50 proposal and to also use it to suggest other solutions to the pension tax issue. 

He also acknowledged that the 50:50 proposal had not received support from the British Medical Association, with the doctors’ union stating it would not remove the incentive for doctors to reduce their working hours. 

Mr Hammond said: “We have said that the consultation will look at questions around the 50:50 proposal but it will also be open to other responses and suggestions.”

amy.austin@ft.com

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