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Press comment: A radical and controversial move to pay NHS pension tax bills

18/11/2019

If you are covering the news that the government is planning to pay the pension tax bills of NHS workers caught by the pensions annual allowance taper, please find comment below from Jon Greer, head of retirement policy at Quilter:

Jon Greer“It would be a radical move by the government to pay the pension tax bills of NHS workers. It is an effective admission that the pension annual allowance taper is a broken policy that is too unpredictable and punitive, however it has taken the country to be on the cusp of a winter crisis in the NHS during an election for the government to address it.

“This would be a controversial policy given it offers NHS staff special treatment and ignores large swathes of high earning public sector workers who provide critical services everyday such as judges, teachers and transport workers.

“This quick fix to avert a crisis is the only option open to the government right now. Over the longer term the government should go much further – the noble thing to do would be to accept the taper is not fit for purpose and reverse it.”

Background:

Introduced from April 2016, the policy reduces the annual allowance for pension savers with higher earnings, breaking the principal that all pension savers are entitled to relief at their marginal rate of income tax up to the same threshold allowance.

Instead, it penalises higher earners by curbing their entitlement to tax relief on contributions. Individuals with an ‘adjusted income’ of over £150,000 and a ‘threshold income’ over £110,000 are affected.

For every £1 of ‘adjusted income’ over £150,000 an individual loses 50p of their annual allowance. This tapering effect means someone with income of £210,000 is left with an annual allowance of just £10,000, a 75% reduction on the standard £40,000 annual allowance.

The controversial policy has resulted in dire unintended consequences for key frontline workers in public services, especially the NHS. The taper is particularly damaging for workers in public sector DB schemes because of the way their pension accruals are calculated.

Data sourced by Quilter from the Ministry of Justice shows that the issue is not confined to the NHS, with 25% of judges now breaching the annual allowance in another key public service profession suffering recruitment pressures.

 

For more information contact

Tim Skelton-Smith02380 916 99807824 145 076tim.skelton-smith@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)

This press release is for journalists only and should not be relied upon by financial advisers or customers.

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This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.