View more on these topics

Incoming PM Johnson should reform tax relief  

There is an opportunity to abolish the tapered annual allowance and reform pensions tax relief more widely under Boris Johnson’s incoming government, experts say.

The MP for Uxbridge and South Ruislip was elected leader of the Conservative party today and will take over as prime minister tomorrow.

Johnson beat off challenger and foreign secretary Jeremy Hunt by winning 66 per cent or 92,153 votes from Tory party members.

There has been commentary about what financial advisers and investors can expect from Johnson’s administration.

Industry reacts to new prime minister Boris Johnson

Yesterday the government published a consultation where it said high earning doctors should be able to reduce their pension contributions to avoid being penalised by the tapered annual allowance.

The Department of Health and Social Care suggests a ‘50/50’ proposal where members could reduce the amount of pension they build up alongside the amount paid.

Health professionals in the NHS have complained about being hit by higher allowance charges and the British Medical Association has written to the government repeatedly about the issue.

But experts say the recommendations in the paper do not address the wider problems high earners face from the tapered annual allowance.

They argue the new government could use the consultation as a launch pad to review pensions tax more deeply.

AJ Bell senior analyst Tom Selby says: “Johnson has promised to ‘fix’ the pension tax crisis currently engulfing the NHS. This complex fudge is unlikely to appease those affected, however, and while Johnson has not said how he will ‘fix’ the problem, scrapping the taper altogether would be the obvious solution.

“This could then be used as a starting point for a broader review of the pension tax regime, with a central aim of simplification and increasing the number of people saving for retirement.

“If Johnson does ditch the taper, however, he would blow a £1bn hole in the Treasury’s coffers which would need to be plugged.”

Chancellor Philip Hammond previously announced he would resign if Johnson becomes prime minister.

Barnett Waddingham senior consultant Malcolm McLean says the new chancellor should urgently review the whole system of pension tax reliefs.

He points out the annual allowance taper is now having an adverse effect on other highly paid key workers, such as air traffic controllers, for who flexible working patters and extra hours are an integral part of their jobs.

He says: “In my view it is not in the public interest for this situation to continue any longer than absolutely necessary. The annual allowance taper should be scrapped and replaced with a slightly reduced annual allowance for all, say down from £40,000 to £35,000 per annum.

“The likely imminent arrival of a new chancellor of the exchequer should also be the catalyst for an urgent review of the whole system of pension tax reliefs and allowances, which as they stand now are not working well, are too complicated and are widely misunderstood and misapplied.

“If ever there was an area of pensions law ripe for change, this is it.”

Recommended

4

Govt proposes NHS pensions shake up to defuse crisis

High earning doctors should be able to reduce their pension contributions to avoid being penalised by the tapered annual allowance, the government says. A consultation published by the Department of Health and Social Care suggests a ‘50/50’ proposal where members could reduce the amount of pension they build up alongside the amount paid. Health professionals […]

Westiminster houses of parliament
6

Govt confirms pension changes were unlawful

The government will have to make changes to pension schemes across the public sector after a Supreme Court ruling found reforms made to firefighter’s pensions in 2015 were discriminatory. In a statement yesterday, Treasury secretary Elizabeth Truss confirmed that on the back of the ruling against the 2015 changes, under which workers 10 years from […]

Nationalisation: navigating political risk in the utility sector

With politics again to the fore and a possible election within 12 months, Matthew Franklin, Senior Credit Analyst at Royal London Asset Management discusses Labour’s commitment to nationalise the regulated utilities and why we believe bondholders should be safe. Read the article Past performance is not a reliable indicator of future results. The value of […]

So what does Pensions Dashboard mean for advisers?

Next in our series on Pensions Dashboard, Ian Macintyre, Strategic Insight Manager at Royal London, looks at the impact on the market for advice. Nobody really doubts that Pensions Dashboard will be good for most consumers.  What’s less talked about is the impact on the market for financial advice.  It’s clear that there will be […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. ““If Johnson does ditch the taper, however, he would blow a £1bn hole in the Treasury’s coffers which would need to be plugged.””

    Not really.

    It is dwarfed by a downpaymen of £39 Bn to the EU if Boris does not face them down and as for HS2 and foreign aid…!

    How about cutting taxes and reaping the benefits of consumers having more of their own money to spend!

    Politicians would do well to remember it is our money not theirs!

    • Indeed, in this case, the problem is very simple, none of the politicians are experts on tax, mathematics and pensions and the tapering interaction with DB pensions, causes a cliff edge that cannot be controlled in the current or old public sector DB schemes.

      I could happily explain it all to them in detail, along with the options, but I would charge them a very hefty price to do so.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com