Govt urged to cover pension tax bills for armed forces

Govt urged to cover pension tax bills for armed forces

The Forces Pension Society has called on the government to extend its temporary fix for pension tax issues for senior clinicians to the armed forces.

Last week the government said it would cover the tax bills of members of the NHS Pension Scheme in frontline clinical roles in England in an attempt to fix the crisis surrounding the scheme.

This was after 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 tapered annual allowance, which reduces the tax free amount high earners can put into their pensions.

The Forces Pension Society, which acts as the pensions watchdog for the military community, argued the armed forces were also heavily affected by the taper.

It called for the temporary fix to be extended and for a long-term solution to also be applied to armed forces members.

The FPS said: “The FPS remains committed to campaigning to seek a fair, long-term solution to pension taxation for defined benefit public sector schemes but we must wait for a new government to sit to renew our engagements.

“The central tenet to our engagements will remain that pension tax is having significant impact upon an increasing number of armed forces personnel, and any long term solution for the NHS or other public services should be equally applicable to members of the armed forces.”

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.

A consultation from the Department of Health and Social Care, published in September, proposed to allow defined benefit scheme members to choose a personalised pension growth level at the start of each tax year as a way of offsetting the taper allowance.

At the time the Ministry of Defence said that it would review these proposals to see how they would best suit armed forces personnel.

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