Pensions - Articles - Quilter and Aegon comment on changing GPs Pension Tax rules

Comment from Quilter and Aegon as Matt Hancock is in discussions with the Treasury about changing GP pension tax rules

  Ian Browne, pensions expert at Quilter: "The health secretary Matt Hancock revealed yesterday that he is in discussions with the Treasury about the growing anger surrounding GP pension tax rules, which are impacting not just this group’s retirement funds, but is also having an impact on recruitment for the sector.

 "The lifetime allowance for pensions tax relief was cut from £1.25m to £1m in 2016 which essentially means that may GPs see no benefit in continuing to pay into their pension fund and instead leave the profession early before their normal pension age. This has led to a drastic and increasing number of opt outs. For NHS staff the figures show that there has been a 78% increase from 2015 to 2016 and a quarter of a million opted out between 2015 and 2017.

 "From a policy perspective its likely Matt Hancock’s discussions will fall on deaf ears in the treasury as they understandably won’t want to carve out a whole set of separate rules for the taxation of doctor’s pensions as you can be sure that other professions with vested interests will want the same treatment and it sets a dangerous percent. Differing pension rules for different professions is at best unfair and serves to complicate an already incredibly complex system.

 "Similarly, if the treasury decided they would change lifetime allowance rules for all going forward then you are still left with a group of people who have suffered with the consequence of these rules for a period of time and will likely want recompense. Funding that would hit government coiffures hard.

 "Triage is an essential part of how a hospital works and with Brexit right around the corner Government will be using a similar strategy to decide what policy changes have to be done right away. So even if they did want to make sweeping changes to the Lifetime Allowance they will be unable to get anything thorough parliament meaning no changes to primary legislation will be on the cards any time soon.

 "Doctors and others who think they might breach the lifetime allowance will benefit from getting financial advice and consider alternative ways of funding a pension for their retirement planning"  

 Steven Cameron, Pensions Director at Aegon said:“We welcome the discussions taking place between the Health Secretary and the Treasury about relaxing the pension tax relief limits for GPs. Some GPs find that a year’s contributions going into their scheme can exceed the ‘annual allowance’, while others find the value of their pension grows over time to exceed the maximum ‘lifetime allowance’, which in both circumstances results in tax penalties. It’s bizarre that some GPs say they’re being forced into early retirement to escape this pensions tax penalty.

 “But it’s not just GPs who are affected. These discussions really do need to look more broadly at the impact pensions limits are having on a range of professions. Changing the pension tax relief limits just for GPs would further complicate an already complex tax system and create an unlevel playing field for pension savers in other professions.

 “A pension pot at the lifetime allowance of £1.055 million from next tax year may sound like a lot, but it won’t buy a ‘fat cat’ pension. We’d urge the Government to reverse previous cuts in the lifetime allowance, which stood at £1.8 million in 2012 or ideally scrap it altogether. We should be encouraging people to save more for longer lifespans in retirement, not forcing them into early retirement to escape a tax bill.

 “With social care funding also falling within the Health and Social Care Secretary’s remit, a lifting of the lifetime allowance would also pave the way for pensions to be used to fund both ‘normal’ retirement income and also potential later life care costs.”

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