Tax 

Johnson to fix pension tax

Johnson to fix pension tax

Candidate for the Conservative party leadership, Boris Johnson (pictured), has vowed to make changes to the pension tax issues that are affecting doctors and others if he is elected as prime-minister.

According to The Telegraph, Mr Johnson pledged yesterday (July 8) to address the issue of the lifetime allowance if he wins the leadership race.

He said: "This is something I have raised repeatedly, the £1.1m pension cap, which is affecting doctors and other people. 

"It’s obviously wrong, it’s causing a real problem, I have raised it repeatedly with the Treasury and they keep telling me they’ve addressed it but the headlines show it has not been addressed, and we will fix it, we will fix it."

The lifetime allowance is the limit on the amount of money that can be saved in a pension without triggering a tax charge, which applies equally to all taxpayers.

Concern about doctors' pensions, however, have increased significantly 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.

It emerged in December that the number of members leaving the NHS Pension Scheme was five times higher than that seen by other public pension funds.

In June, Health and Social Care secretary Matt Hancock announced that the government will 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". However, the doctors union argued that the 50:50 proposal would not remove the incentive for doctors to reduce their working hours.

At a recent debate in Parliament, Elizabeth Truss, chief secretary to the Treasury, said the government was taking this issue very seriously and that the consultation would be published shortly,

She said: "There is a fundamental distinction between how we deal with the issues in the NHS, on which the Health secretary is leading, and the broader issue of our pension system, which is there to encourage people to save.

"That has to be considered in a holistic manner so we cannot ​just design it around one workforce. It has to be designed to work for everybody in both the public and private sectors. That takes time of course, and we are working through some of the conclusions of the reforms that took place a few years ago."

Ms Truss noted there was a need for "a simpler tax system that has the right incentives throughout".

She said: "It is a major task for the new prime minister to ensure that our tax system is simpler and has proper incentives. […] There is no doubt in my mind that the British tax system is too complex at present."