11 March 2020 - After five years, the Tapered Annual Allowance for pensions has finally been amended by Rishi Sunak, Chancellor of the Exchequer.
The Tapered Annual Allowance was introduced in April 2016 to reduce the amount of pension contribution that could be made or received by high earning individuals. Therefore, anybody who had income in excess of £150,000 could be affected by this limit, which tapered down the annual allowance from the normal level of £40,000 to potentially £10,000.
However, in recent years, this has been causing issues for some key employees within the NHS including Consultants and GPs, and was actually causing some NHS staff to reduce their overtime. This was due to what was felt to be an unfair annual allowance tax charge, with workers citing that they couldn’t avoid the tax charge due to their involvement in the NHS Defined Benefit Pension Scheme.
Therefore, the Chancellor has recognised that this was an issue and has increased the adjusted income level where the Tapering starts from £150,000 to £240,000. Whilst this will take around 98% of NHS consultants and 96% of GPs out of the taper altogether, it should also be good news for many high earners who have historically been affected by this and we welcome the move.
The Lifetime Allowance has also been increased slightly from 6 April 2020 from £1,055,000 to £1,073,100, in line with inflation.