Hancock: 'I'm in discussions with Treasury about removing pensions tax taper'
Exclusive Health secretary Matt Hancock has told Pulse in an exclusive interview he is in talks with the Treasury about removing the pensions tax allowance taper that the BMA says is responsible for scores of doctors reducing hours or retiring early.
Speaking to Pulse today, he said that he has been ‘working very closely’ with Chancellor Sajid Javid about the future of the taper, after the Treasury announced a review.
Mr Hancock announced his review into pensions taxes in an interview with Pulse earlier this year after reports of GPs cutting their hours or retiring early because they were paying to work.
However, proposals to offer GPs and other doctors the chance to halve their pensions contributions were not well received and were dropped, but further proposals - which gave even more flexibility in their contributions - were equally poorly received.
The BMA said that the only way to prevent GPs leaving the profession would be to remove the ‘taper’, which reduces the tax-free annual allowance the more an individual earns.
Pulse asked Mr Hancock whether the removal of the taper ‘is something you are going to be looking at?’
Mr Hancock replied: Yes. The Treasury has already announced that it is considering changes to the taper and has a review of the taper and I’m obviously feeding into that.
‘Having originally announced in Pulse magazine that I was talking to the Treasury about this I’m delighted to say that the Treasury eventually under the new chancellor announced a review into the operation of the taper and obviously I am working very closely with them on that.’
He clarified that this would be in conjunction with the ongoing pensions proposals.
Earlier this week, shadow health secretary Jonathan Ashworth told Pulse that he would ‘urgently review’ the current pensions tax situation.
How the taper works
Under current rules, people are allowed to increase their pensions pot by £40,000 per year before incurring a tax charge.
However, this annual allowance reduces, with those earning above £150,000 per year seeing their annual allowance reduce to a little as £10,000. This £150,000 includes all benefits, such as pensions accrual, meaning that realistically anyone earning £110,000 a year plus their £40,000 tax free pensions accrual will be affected.
This means that GPs could face an increasing tax charge on their pensions, even if they decide to stop contributing to their pensions part way through the financial year.
The BMA has said that, because of this, any attempts to give GPs flexibility in their pensions contributions - which the Government has proposed - is doomed to fail, as it won’t stop them being punished for continuing to work.