Tax  

Unions threaten legal action over pension tax changes

Unions threaten legal action over pension tax changes

Unions representing dentists and firefighters are threatening legal action against the government if the tapered annual allowance review isn’t applied to other public sector pension schemes.

FTAdviser reported yesterday (August 7) that HM Treasury will be reviewing the impact of the tapered annual allowance, after doctors have been campaigning to scrap it for months.

This was as part of a further consultation on the rules of the NHS Pension Scheme, which will soon be published and replace 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.

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.

But unions working on behalf of dentists and firefighters are now calling on the government to widen its work to cover all public sectors.

As first reported by FTAdviser’s sister newspaper, the Financial Times, Mick Armstrong, chairman of the British Dentist Association, said in a letter to Matt Hancock, secretary of state for Health and Social Care, that most recent statistics showed dentists providing an NHS contract, and who spend more than 75 per cent of their time on NHS work, had an average taxable income of £113,600.

“Dental consultants employed within the NHS have a payscale that is identical to their medical counterparts and so will be exposed in exactly the same way to pension tax charges,” he said.

The point of contention is the restriction on the annual amount pensions can accrue tax free.

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.

Mr Armstrong added: “With access problems to NHS dentistry mounting, government should not be giving colleagues any reason to do less.  

“It's great ministers have recognised the need for flexibility, but no healthcare professionals should be left behind. Failure to take a consistent approach risks opening the floodgates to legal challenges.”

The issue of heavy tax bills has also started to impact Fire Brigades Union members, national officer Sean Starbuck said.

He added: “It used to be just high earners, but now it is an issue for middle managers as well.

“We’ve raised this issue with fire service employers and government departments repeatedly in the past, and we’ve looked at ways to avoid breaching it and incurring the change.

“We will want to get our members as much flexibility as possible in relation to this issue and it is important that, if it is available, firefighters get the same opportunities as other workers.