Urgent review called for to reduce unfair tax charges on pensions
By Edie Bourne
NHS Pension Scheme members exceeding the annual allowance in 2019-20 made up a third of the total number of pension tax breaches.
At least 34% of individuals who breached the annual tax-free pension savings limit belonged to the health service scheme.
The news brought a renewed call for an urgent Government review to reduce unfair tax charges on doctors.
The number of senior doctors affected could be even higher because more than 18,000 GPs had still not received their 2019-20 annual allowance statement by 31 January this year, so are not yet included in the numbers.
In the tax year 2019-20, the total value of pension contributions reported as exceeding the annual allowance was £949m – an increase from £819m in 2018-19.
Patrick Convey, technical director at specialist financial planners Cavendish Medical, said: ‘These figures show perfectly how medical professionals are more likely to breach the annual allowance compared to other professionals.
‘The very nature of the NHS scheme means it is all too easy for pension growth in a year to be higher than the tapered or standard tax-free savings limits.
‘We are seeing many senior doctors who are forced to retire early because it would make no financial sense to stay longer. This, of course, has a detrimental effect on staffing levels at a time when the NHS is facing substantial backlogs.
‘Other professions such as judges have witnessed overhauls of their pension tax rules in recent years and it is obvious the NHS scheme needs further review too.’
The annual allowance limits the amount of tax-free pension savings which can be accrued per year to £40,000.
For higher earners, the ‘tapered’ annual allowance applies which can be as low as just £4,000.