Pensions Tax Relief: Employment and Retention

Lord Davies of Brixton Excerpts

Tuesday 1st November 2022 Lords Chamber

Asked by

[Lord Davies of Brixton]

To ask His Majesty’s Government what assessment they have made of the impact of the annual allowance, used for the purposes of tax relief on occupational pensions, on (1) the employment, and (2) the retention, of members of public service pension schemes.

[Viscount Younger of Leckie (Con)]

My Lords, the Government greatly value the work of all public sector staff, be they NHS workers, teachers or police officers. Public sector pension schemes are mainly defined benefit schemes and are among the most generous available. The annual allowance affects only the highest-earning pension savers, and the Government estimate that 99% of pension savers make annual contributions below £40,000—the level of the standard annual allowance.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the Minister for his reply, but it is worth reminding ourselves that the last Prime Minister promised to stem the exodus of doctors from the NHS. The Prime Minister before that promised to fix the pension tax relief rules, and the new Chancellor, no less, has called the situation a “national scandal”. Of course, the annual allowance is a general problem that can affect people across all defined benefit pension schemes, not least senior nurses—this goes back to the previous Question. But does the Minister understand that, given the 10% increase in the CPI this September and given the rules of the NHS scheme, some GPs will be faced with additional tax bills into six figures this coming year? Does he understand the extent of the scandal and that tinkering with the rules will not be enough? Radical action is required.

[Viscount Younger of Leckie (Con)]

I recognise some of what the noble Lord has mentioned. In recognition of the impact that pension tax has on senior clinicians in the NHS, and to improve staff retention, which was part of the subject of the last Question, the Government announced changes to the NHS pension scheme on 22 September. These include changing the pension rules regarding inflation, encouraging NHS trusts to offer so-called pension recycling—the noble Lord will know more about this than me—and implementing permanent retirement flexibilities to allow experienced staff to return to service or stay in service longer.