NHS Pension Scheme: Tapered Annual Allowance

Jim Shannon Excerpts

Tuesday 2nd April 2019 Westminster Hall

[Paul Masterton (East Renfrewshire) (Con)]

I beg to move,

That this House has considered the effect of the tapered annual allowance on NHS pension scheme members.

I have been aware of this issue for some time, as a local MP and as a former pensions law practitioner. Primarily through the work of the journalist Josephine Cumbo at the Financial Times, it has come to light that it is significantly more widespread and has much more serious implications for the NHS than I had originally understood.

I do not want to take up too much time on what the annual allowance taper is and how it works, partly because it is boring and incredibly complex, but a small amount of background is needed before explaining why it is an issue in the NHS and the consequences that seem to be flowing from it.

The tapered annual allowance was introduced from 6 April 2016. In short, it meant that from the 2016-17 tax year, a reduced annual allowance may apply to all pension savings by or on behalf of a member, depending on the level of taxable income within the tax year. It applies to individuals with a threshold income of more than £110,000 and an adjusted income of more than £150,000. For every £2 that an individual’s adjusted income goes over £150,000, their annual allowance for that year reduces by £1. The minimum reduced annual allowance someone can have is £10,000.

It will not be a surprise that the calculations of threshold and adjusted incomes are not simple in the least. They are massively confusing and make it very difficult to predict what tax bill will be incurred. As it cuts the annual allowance for the current year, an individual has no idea how much pension saving they can make.

[Jim Shannon (Strangford) (DUP)]

The Financial Times reported that some doctors, GPs and dentists will receive a potential tax bill of £80,000. Does the hon. Gentleman agree that we and this Government have a duty to ensure that NHS staff have all the information so that no one faces unexpected tax bills?

[Paul Masterton]

The hon. Gentleman is absolutely right. One of the key issues is that because it reduces the tax allowance in the current year of work, it is impossible to work out what the annual allowance will reduce to, and people cannot plan. I will go on to raise some examples from my own constituents, as I am sure other hon. Members will want to do.