Treasury to review tapered annual allowance

Treasury to review tapered annual allowance

HM Treasury will be reviewing the impact of the tapered annual allowance for public sector workers, after doctors have been campaigning to scrap it for months.

In a joint statement published today (August 7), officials from Treasury and the department of Health and Social Care announced that a further consultation on the rules of the NHS Pension Scheme will soon be published, replacing the document published two weeks ago.

Starting from the next financial year, the government wants to allow doctors to set their level of pension accruals themselves at the start of each year.

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Under this rule change senior clinicians can set any percentage for contributions and accrual rate, in 10 per cent increments, depending on their financial situation.

Employers will then have the option to recycle their unused contribution back into the doctor’s salary, the government stated.

Recognising that around a third of NHS consultants and GP practice partners have earnings from the NHS that could potentially lead to them being affected by the tapered annual allowance, Treasury will look to “review how the tapered annual allowance supports the delivery of public services such as the NHS”.

The government will continue to engage with the NHS, the British Medical Association and other stakeholders as part of this process, it added.

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, most likely because of the taper.

Introduced in 2016, the tapered annual allowance 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 taper means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

According to Sajid Javid, chancellor of the exchequer, the “government is committed to ensuring that British people see a real difference in public services, including getting quicker GP appointments and a reduction in waiting times”.

He added: “Critical to that is introducing flexibility into the system so that our hospitals have the staff they need to deliver high-quality patient care, which is why we’ve listened to concerns and will be reviewing the operation of the tapered annual allowance.

“This will help to support the delivery of our vital public services.”

Dr Chaand Nagpaul, BMA’s council chair, has welcomed he government’s announcement, noting that the proposed flexibilities will “provide short-term relief for many doctors, but they themselves do not tackle the core and underlying problem”. 

He said: “This lies in tax reform, and as we have said before, it is the overhaul of the annual allowance and tapered annual allowance, that will make a difference to all doctors, including consultants, GPs and medics in the Armed Forces.

“It is positive that the chancellor has committed to review the punitive tapered annual allowance – this marks an important step-change from the government, and comes as the direct result of the BMA’s campaigning.