Chancellor Philip Hammond has ruled out scrapping the tapered annual allowance and argues it is “necessary to deliver a fair system and protect the public finances.”
MPs questioned Hammond in parliament today about senior NHS clinicians’ tax implications from the tapered annual allowance and annual allowance.
They pointed out both allowances are forcing senior NHS doctors to retire early or do less work and the government should step into correct this problem.
Earlier in May former pensions minister Steve Webb called for the Treasury to abolish the tapered annual allowance as quickly as possible to tackle the NHS pensions crisis.
Webb argued it is “utterly absurd” doctors might not work extra shifts due to pension tax concerns.
The British Medical Association has also written to Hammond that doctors will start to reduce their working hours unless reforms are made to the NHS Pension Scheme.
But Hammond defended the current pensions tax system and pointed out it is broadly fair as allowance breaches only effect the highest earners.
He said: “The NHS Pension Scheme and other public sector pension schemes are among the most generous pension schemes in the country today. The tapered annual allowance is focused on the highest earning pension savers to ensure they do not receive disproportionate tax relief.
“I do accept there is some evidence the annual allowance charge is having an effect on retaining high-earning clinicians in the NHS. I am in discussions with the health secretary about how to provide additional flexibility for NHS doctors affected by the annual allowance tax charge and he will make announcement as soon as possible.”
Hammond added: “In the last two parliaments the overall reforms to pension allowances included the taper annual allowance which are necessary to deliver a fair system protect and protect the public finances. These are expected to deliver £6bn in revenue a year.”