Steven Cameron, Pension Director at Aegon said: “There has been growing disquiet among senior NHS staff about pension arrangements with significant numbers incurring tax bills due to personal and employer contributions, or increases in pension entitlements, exceeding pensions tax allowances. The total amount that can be saved in a pension was cut dramatically seven years ago and the experience of the NHS shows the new rules are now affecting the retirement plans not just of the super wealthy. The prospect of tax penalties on pensions contributions has been cited by many NHS staff as a reason for choosing to retire early, a situation which means a great deal of skill and expertise is leaving the healthcare profession earlier than it otherwise would.
“We welcome the plans to address this situation by reforming the NHS scheme. Many private sector schemes allow individuals at risk of breaking pension allowances to swap pension contributions for increases in pay and this should be made available to NHS employees. The alternative of granting special allowances just for NHS employees would have been unfair and would have further complicated the pensions tax system.
“However, we would encourage the Government to review the current maximum fund, or lifetime allowance, that can be built up in a pension without tax penalties. The current limit of £1.05m may seem like a lot, but it could buy a lifetime income at age 60 of around £20,000 to £25,000 depending on whether you’re buying a single or joint life annuity and how much inflation protection you want. This sum would certainly not be regarded as a particularly high income for people of working age.”
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