Chancellor ups annual pension allowance thresholds by £90,000
The point at which tapering of the annual pension allowance kicks in will increase by £90,000 for both threshold income and adjusted income in 2020/21.
The move, which was announced in last month’s Spring Budget, means the taper will not affect anyone with income of less than £200,000.
It brings to an end a long-running rift between the Government and senior clinicians, many of whom either retired early, left the NHS pension scheme or rejected overtime shifts to avoid tax bills.
Chancellor Rishi Sunak said this “will take around 98% of consultants and 96% of GPs out of the taper altogether”, although critics argue the controversial taper should have been abolished.
Sunak also announced a reduction to the minimum annual allowance to £4,000 for those with incomes which breach both the threshold income and adjusted income limits.
Steve Cameron, pensions director at Aegon, said:
“The tapered annual allowance has seen some senior NHS professionals facing tax bills running to six figures. Removing the taper would have been too costly but instead, the threshold when it kicks was raised. This may reduce the number of higher-paid individuals who face a tax penalty, but many individuals will still fear being caught out. The Government’s priority right now must focus on health matters. Longer term, the overall system of pension reliefs and allowances needs a thorough overhaul to make sure it is fit for purpose and not just for the NHS.”
The £40,000 annual pension allowance – which remains in place for 2020/21 – is tapered for those on high incomes.
That meant for every £2 of adjusted income above £150,000 a year in 2019/20, where the threshold income of £110,000 was also breached, £1 of the annual pension allowance was lost.
From 6 April 2020, the adjusted income figure increases to £240,000 and the threshold income increases to £200,000.
For further information on the annual pension allowance, please contact Helen Spalding on 023 8046 1234.