Scrapping higher rate relief from pension contributions could make the NHS pensions crisis worse – comment from Tilney

10 February 2020
 

It has been reported in the press that the Chancellor of the Exchequer is considering plans to introduce a “mansion tax” on high value properties and also to remove higher rate relief from pension contributions.

Commenting on the report, Gary Smith, chartered financial planner at Tilney, says: “A potential of scrapping of higher rate tax relief on pensions has repeatedly reared its head since George Osborne commissioned a consultation into the future of pensions tax relief during his tenure as Chancellor. A new Government with a commanding majority may well feel it is a position to implement such a policy that would prove unpopular with those impacted.

“However, in contemplating such as move, the Government needs to give careful consideration as to how this might impact public sector professionals, especially doctors working in the NHS, where previous tinkering with pension taxation has caused chaos. I would be interested to know how the removal of the higher rate pensions tax relief could be applied to public sector pension scheme members, as their pension contributions are currently deducted from gross salary before income tax is calculated, thus they automatically receive high rate relief. If they were to alter this, it would increase the tax liability for NHS workers, which could actually make the current crisis even worse.

“However, if the Chancellor doesn’t alter Public Sector schemes, this potential reduction in pension tax relief might only apply to private sector workers, which would be grossly unfair. Removing the higher rate relief means that he would also have to scrap salary sacrifice arrangements as higher rate relief would effectively be obtained if this option remains. There are also those business owners who actually make pension contributions through their business to obtain Corporation Tax relief, and these would be unaffected by scrapping higher rate relief.

“It will be interesting to see how any change to pension tax relief would be implemented, but it I believe the need to see a financial planner would be vital to see how these changes could affect you.”

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years.  Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.