Gold-plated NHS pen­sions ditched by 245,500 as tax bill rises

The Daily Telegraph - Your Money - - MONEY - Laura Miller

NHS work­ers are aban­don­ing their gen­er­ous gold-plated pen­sions in droves, with a quar­ter of a mil­lion opt­ing out since 2015, ac­cord­ing to new data lay­ing bare the ex­tent of prob­lems first re­vealed by Tele­graph Money.

Ex­perts are blam­ing the ex­o­dus of 245,500 NHS staff from their de­fined ben­e­fit pen­sion scheme in the past three years, in­clud­ing 100,000 dur­ing 2016 alone, on the creep of tight­en­ing tax rules.

Jon Greer, head of re­tire­ment pol­icy at wealth man­ager Quil­ter, said: “The im­pact of the life­time al­lowance is be­gin­ning to rear its head, a trend likely to con­tinue as the Trea­sury has made it clear that tax­a­tion on pen­sions is no longer for the sub­stan­tially wealthy.”

Two poli­cies have hit those with gen­er­ous pen­sions hard­est: cuts to the an­nual and life­time al­lowances, which in­creas­ingly turn healthy re­tire­ment funds into a tax bur­den. In April 2016 the Govern­ment re­duced to £40,000 the an­nual al­lowance in­di­vid­u­als can put into their pen­sion and still get tax re­lief. Grad­u­ally it has also de­creased the life­time al­lowance, the max­i­mum you can save into a pen­sion, to £1.03m from a peak of £1.8m in 2010. Sav­ings ex­ceed­ing that will be hit with a tax charge of up to 55pc on the over­flow. You are likely to be af­fected by the life­time al­lowance in 2018/19 if you are on track for a fi­nal salary pen­sion, with no sep­a­rate lump sum, of more than £51,500 a year.

Tele­graph Money re­vealed last month that pub­lic ser­vants across Bri­tain are re­volt­ing against these pen­sion changes – which they say punch holes in front-line health, jus­tice and emer­gency ser­vices – in a bid to get the Chan­cel­lor to im­prove rather than cut tax re­lief.

Philip Ham­mond, the Chan­cel­lor, is gear­ing up to de­liver his Bud­get on Oct 29. Ring­ing in his ears is a call from the Trea­sury se­lect com­mit­tee to cut the amount that savers can put into their pen­sions each year, thereby sav­ing the Govern­ment some of the £24.1bn it is fore­cast to forgo in tax re­lief this year.

But Dr John Miller, a con­sul­tant who has worked for the NHS in Bri­tain, the mil­i­tary and abroad, told this news­pa­per that his peers in their mid-40s and older are al­ready giv­ing up do­ing ex­tra clin­ics, pa­tient ses­sions and over­time, due to changes to pen­sion tax re­lief lim­its.

Oth­ers sim­ply take their pen­sion and leave the pro­fes­sion, he said. This is borne out by the data show­ing the num­ber of NHS staff leav­ing the pen­sion scheme, pub­lished af­ter an in­ves­ti­ga­tion by trade mag­a­zine the Health Ser­vice Jour­nal. It found the group with the high­est in­crease in opt-outs were 46 to 55 year-olds, with a 94pc in­crease in 2016.

Mr Greer said: “Un­der the pres­sure of im­me­di­ate liv­ing costs, sav­ing for a re­tire­ment ap­pears to be un­af­ford­able, and in cer­tain schemes like the NHS, which pro­vides gen­er­ous ben­e­fits, there is ev­i­dence that the lack of flex­i­bil­ity is even lead­ing to some lower-paid in­di­vid­u­als leav­ing.”

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