Steven Cameron, Pensions Director at Aegon said: “It’s in no-one’s interest that senior health professionals are effectively being forced into early retirement to avoid paying hefty pensions tax bills if they break the pensions lifetime or annual allowance. These limits were cut dramatically seven years ago and the experience of the NHS shows they are now affecting the retirement plans not just of the super wealthy. The issues facing healthcare professionals have attracted a great deal of attention but now is the time to revisit this topic for everyone, not just those in one profession.
“The limits are most likely to affect people who are, or have in the past been, members of a defined benefit pension scheme. These are now much rarer in the private than the public sector, but many in the private sector may have built up a defined benefit entitlement in the past. This means future employer or personal pension contributions can push many people, not just NHS consultants, above the lifetime allowance and incur a tax penalty.
“Offering special concessions to NHS professionals might have addressed concerns over early retirements there, but would have created both complexity and unfair comparisons with those affected in other professions. However, it is only right that those in this position, NHS employee or otherwise, should have the right to swap future employer pension contributions for an increased income. Many employers in the private sector already offer this to higher earners.
“Alongside this, we’d urge the Government to look again at the lifetime and annual allowances. The lifetime allowance puts a cap of £1.06m on how much you can have in your pension fund. While that may seem like a lot, 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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