Print Share

Press comment: HMRC data shows rapid increase in annual allowance breaches


If you are covering the pension annual allowance statistic published today by HMRC, please see the following commentary from Quilter head of retirement policy, Jon Greer.

The data shows that :

  • 26,550 people reported breaching the annual allowance, up more than 11,000% in a decade
  • Close to £1bn was paid in annual allowance charges
  • more than 10,000 people used the ‘scheme pays’ option

Quilter head of retirement policy, Jon Greer:

Jon Greer“Breaching the annual allowance used to be something that only the very highest earners had to worry about. When company executives on significant salaries face checks and balances on the amount they can save with tax relief that is one thing, and those people will already be in a position where their own accountants and advisers to help navigate the complexity.

“But just ten years after a meagre 230 people faced an annual allowance tax charge in 07/08, it is now common place for ordinary workers to be confronted with the complexity of the pension annual allowance and the associated savings dilemma. In the 17/18 tax year more than twenty six and a half thousand people reported breaching the annual allowance tax charge, a staggering 11,443% increase on the same figure ten years ago.

“The figures also show 10,750 people opted for a ‘scheme pays’ option to deal with the tax charge. In total close to £1bn was paid in annual allowance charges, most of which was paid up front by the individuals affected, with £173m paid under the scheme pays option.

“This dramatic shift means that it is now relatively normal for people to face limits on the amount they can save with tax relief and penalties for exceeding that. It places real pressure on people trying to plan their finances and discourages individuals from setting money aside for the future. It is especially problematic for those with variable earnings or bonuses, who may save at a rate through the year which they expect to be under the annual allowance, but then find their plans are thrown off course as their earnings change.

“And of course we know that in the public sector in particular, the introduction of the ill-conceived annual allowance taper has had a disastrous impact. Thousands of doctors, civil servants, judges, armed forces personnel and other public sector workers have faced tax penalties for breaching the annual allowance because of the way their schemes and contributions rates are structured. The result is that employers are having to implement complex workaround, and government departments from the NHS to the MoD are having to devise workaround to alleviate staffing pressures as senior employees consider reducing hours or retiring to avoid the punitive tax charge.

“If you are in a position where this might affect you it is essential to take advice to ensure you use your tax allowances effectively. The system becomes extremely complex at this point and almost impossible to navigate without expert help.”

For more information contact

Tim Skelton-Smith02380 916 99807824 145

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 £95.3 billion in customer investments (as at 31 March 2020).

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 and Quilter International, including AAM Advisory in Singapore.

The Old Mutual Wealth Heritage life assurance business was acquired by ReAssure Group Plc on 2 January 2020.

Since its IPO in June 2018, Quilter plc’s businesses have progressively rebranded to Quilter, as follows: 

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

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

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

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.