Pensions  

Advisers sign petition to scrap tapered allowance

Advisers sign petition to scrap tapered allowance

Advisers and individuals from the pensions industry have joined forces with doctors and are petitioning to scrap the tapered annual allowance.

The tapered annual allowance was introduced in 2016 and gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer a 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.

Concerns about doctors’ pensions hit the headlines when it emerged doctors were refusing shifts to avoid high tax bills.

The government is currently consulting on how to fix the issue but has refused to tinker with the tapered annual allowance that has been blamed for having caused the problem.

Mark Cheetham, a surgeon and care group medical director at Shrewsbury and Telford Hospital NHS Trust, launched the petition yesterday (July 31) calling on the government to abolish the tapered allowance.

At the time of writing, the petition had already secured 5,018 signatures.

When the petition receives 10,000 signatures, the government will respond and if it gathers 100,000 signatures before January 31, the petition will be considered for debate in parliament.

Ex pensions minister and director of policy at Royal London, Sir Steve Webb, has signed the petition along with several advisers.

Sir Steve said: "[The tapered annual allowance is an] absurdly complex bit of the pension system which is causing real harm in the NHS.  

“There are better ways of managing the overall cost of pension tax relief, and the new Chancellor needs to fix this urgently.”

Andrew Moore, director of Goodmans Financial Planning, also supports the cause. He said: “The [tapered] annual allowance causes all the problems and [it is] pointless if you have a lifetime annual allowance.”

Although David Hearne, chartered financial planner at Satis Wealth Management, has not signed the petition he supports the idea of removing the tapered annual allowance.

Mr Hearne said: “If it was scrapped I would want the government to find another way to achieve the same aims of reducing the cost of tax relief. So I would support a lowering of the annual allowance to do this.”

The British Medical Association today (August 1) revealed that out of 6,170 GPs and hospital members, 31 per cent of respondents have already reduced their work commitments due to pension tax charges.

As a result of these charges, 42 per cent of GPs reduced their hours, while 34 per cent planned to do so.

Additionally 30 per cent of consultants reduced their hours while 40 per cent planned to do so.

In an open letter to prime minister Boris Johnson (published July 30), Dr Chaand Nagpaul, chair of the BMA, warned that if the tax charge was not addressed then more doctors will leave the profession.

Dr Nagpaul said: “During the leadership campaign, the BMA welcomed your commitment to “fix” the lifetime allowance – but we also pointed out that the problems doctors face are further exacerbated by the annual allowance and tapered annual allowance.