Police chiefs not taking pay rises over pension tax
POLICE leaders are the latest to be caught in the pension tax trap, amid warnings that four in 10 senior staff are considering leaving over the issue.
Hundreds of chief superintendents say they are being “punished” alongside senior doctors and armed forces personnel in the face of hefty tax bills, if they earn more than £110,000 a year.
The Treasury is reviewing controversial limits on pension saving for those working in the health service, after The Daily Telegraph revealed they risked 10 per cent of doctors quitting and creating an “absolute crisis” that would leave it struggling to care for patients.
The Police Superintendent Association (PSA) have now called on the Government to give them the same special treatment as NHS staff. Daniel Murphy of the PSA, said: “We are simply being punished. We’re finding just an inflation pay rise can mean at the end of the year they are getting a tax bill.”
The changes to pensions were introduced by the former chancellor, George Osborne. They mean higher earners are restricted from putting more than £10,000 annually into pensions without facing taxes.
Currently, the maximum annual limit for saving into a pension is £40,000, but this is reduced to £10,000 for those earning more than £150,000, with those earning between £110,000 and £150,000 progressively losing the more generous allowance. These can be up to 40 per cent today on pension money that is locked away for years. The Telegraph revealed yesterday that the Armed Forces were facing similar issues.
It comes as Prime Minister Boris Johnson has pledged to put 20,000 more police on the streets to cut crime.
Mr Murphy said that while some officers look to leave, others are shunning promotions to stop their pay increasing. He said: “Everyone is saying, ‘I’ve decided to take on more responsibility and yet I’m getting a higher tax bill than I am in pay’.”
Police pensions accrue the largest amount in the last 10 years of service, a system used to retain staff and encourage them to rise up the ranks.
A survey by the PSA of its 1,200 members in 2018 found 44 per cent of respondents received an annual allowance charge, almost double the previous year and up from just 9 per cent in 2015/16. Almost four in 10 said pension issues were increasing their intention to leave, up from three in 10 the year before.
Baroness Ros Altmann, a former pensions minister, said: “The pension system right now is having very negative consequences on public sector staff who feel penalised. The problem is no one has been alerted to this unless they had a financial adviser. People haven’t budgeted for it.”
The government is assessing the impact of pension annual allowance rules on the delivery of all public services, The Telegraph understands.
A Treasury spokesman said the matter of pension tax rules “would be considered in the round”.