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Press release: NHS not alone in pension dilemma as 25% of judges breach annual allowance

12/07/2019

New data today illustrates how complex pension rules imposed by the previous Chancellor, George Osborne, in the 2015 budget risk intensifying staffing pressures in the UK judicial system. It adds to the growing case against the government’s controversial pension annual allowance taper, which has already created resource strain in key services such as the NHS, where senior clinicians are facing huge tax bills due to the policy.  

A freedom of information request from Quilter shows that around 25% of judges breached the annual allowance on pension contributions in 2017/2018. According to judiciary statistics for 2018 there were a total of 2,978 judges appointed in the UK and Quilter’s FOI shows 764 Judicial Pension 2015 Scheme members* breached the annual allowance in the 2017/18 tax year.

In April last year, lord chief justice, Lord Burnett of Maldon made a statement before a Lords select committee citing pensions and increasingly heavy workloads as problems threatening judicial recruitment resulting in extra strain on the justice and court system. In June this year, Secretary of State for Justice David Gauke also stated that around 10% of High Court judicial positions remain unfilled and cited pensions as a contributing factor.

Other key public services professionals have also cited pensions as a factor exacerbating staffing pressures. The British Medical Association has urged the government to review its pension annual allowance taper, which is encouraging senior clinicians into early retirement. In June the NHS announced plans to consult on a proposed remedy to the situation.

The annual allowance affects individuals saving into a pension and restricts the amount they can save tax free in any given year. The annual limit was in excess of £250,000 as recently as 2010/11. But it has since been cut dramatically and now stands at just £40,000. A tax charge is applied at their marginal rate of income tax on any pension contributions over the annual allowance. 

For higher earners an additional ‘taper’ brings the allowance down further. Introduced in 2016, the policy sees savers lose £1 from the annual allowance for every £2 of remuneration over £150,000. It reduces down to just £10,000 for individuals with total earnings of £210,000 or more. 

Certain Public sector workers in defined benefit (DB) pensions are particularly vulnerable. This is due to the way benefits accrued under a DB pension are calculated, and means a worker can easily see their pension accrual docked under an annual allowance tax charge.

Further to this the scheme gives members a chance to apply for a ‘scheme pays’ option. However, currently just 4% of members opted for it potentially showing that it offers little protection against members hit by a tax charge and that more needs to be done to promote it.

Year Number of JPS members who exceed the annual allowance Number of schemes pays applications Number of schmes pays applications accepted
2015/2016 503 1 1
2016/2017 591 17 17
2017/2018 764 28 28

 

 

 Quilter pensions expert Ian Browne says:

Ian Browne“There has recently been a huge outcry from the medical profession as rafts of people have breached the annual allowance and are subsequently forced into a tax penalty. The result is doctors are choosing not to do overtime, putting strain on an already creaking NHS.

“However, our data shows other essential public sector workers such as judges are also starting to suffer with the unintended consequences of an intricately layered tax system in need of simplification. The knock on effect of this is that public sector workers are disincentivised to join these types of roles or increase their hours putting these systems under immense pressure.

“Anyone that may be affected by an annual allowance charge should think about seeing a financial adviser. They can help ensure you are making the most of your tax allowances and could save you huge sums.”

For more information contact

Michael Glenister020 7778 963807469 144535michael.glenister@quilterinvestors.com
Alex Berry023 8072 626007741 151931alex.berry@quilter.com

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.7 billion in investments (as at 30 September 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

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