Listeners to Paul Lewis’ MoneyBox were treated yesterday to a lively debatebetween Jo Cumbo , John Ralfe and Paul Lewis. While interpretations of the problems facing the NHS and in particular the NHS pension scheme and its membership differed, what came out of the discussion is that there is a big problem with the annual allowance and especially its taper.

The debate is available on this link from minute 13.30 to the end (12 minutes)

I will assume that readers know the basics on this, if not- I’d point you to the article on this blogon the BMA’s position on pension cuts and especially Dr Nitin Arora’s passionate article on how the AA and its taper are damaging the NHS.

I’d also recommend any of Jo Cumbo’s articles in the FT but particularly this one which I believe is free to read.

This article focusses on the key moments of the tri-partite  debate , where Lewis probed for solutions, Ralfe referred us to his (without having time to tell us what they were) and Cumbo pointed to the calls from the BMA to scrap the taper and the NHS Pension Scheme to offer partial membership.

John Ralfe was right to expect little from his letter to the NHS minister Matthew Hancock, at least in the short term. Two former pensions ministers, Steve Webb and Ros Altmann are closer to Hancock and saying much the same. The process for changing tax legislation (or even NHSPS scheme rules) is a long one. The taper issue is only one of a number of tax anomalies that HMRC need to deal with. You sense that at this time, we are unlikely to see the wholesale reform envisaged in 2015 (pre Brexit) or further tinkering (as has proved so unpopular in recent times).

There seemed a consensus that we are going to have to live with this mess for some time to come.  My question is who is going to offer the help needed not just for doctors but for the HRDs and Reward Directors of the increasingly large numbers of medium to small employers with DB schemes and no pension taxation specialists.

A random problem

I call out the medium sized employer without pension expertise as only one of a number of entities in need of assistance. They spring to mind as I have just written an article for the CIPP (Chartered Institute of Payroll Professionals) urging their membership to become aware of this issue and swot up on behalf of their staff. The CIPP (and the Learn Centre) do a great job teaching payroll and reward specialists about issues such as this.

But training of in-house professionals will only catch a proportion of the inquiries. Sadly, most of the pension bills that arrive for high earners are unexplained and result from self-assessment without any proper explanation of how they occurred. Many of them are preventable – with the help of a good adviser conversant with carry-back and capable of guiding lay-people through the form filling needed for the necessary elections.

Twitter self-help groups are one thing, but they can do little more than connect those already on their way to a solution – with the excellent IFAs and tax-advisers who haunt those parts.

The randomness of the problem, the fact that it strikes in the most improbably of ways and on people who are least suspecting, is what makes the Annual Allowance and in particular the AA Taper, so destructive.

HMRC entrapment?

I fear that most people with a pension taxation issue , will hardly know what hits them and will pay HMRC on demand without questioning their rights to mitigate their tax,

There is no obvious place for people to go to get the detailed advice they need and many will resort to what used to be TPAS, is now the SFGB and is soon to be the Money and Pensions Service (or is it the other way round?).

As with the taxation of pension freedoms, there appears to be an element of entrapment by HMRC who have allowed the default position to become the overpayment of tax or – extremely, the mitigation of Government liabilities through despair (for pension freedoms read “cash-out”, for the NHSPS “opt-out”.

I do not see the Government’s limited resource, even in its new guise, having the capacity or scope to reach out to the people who most need help, those who have earnings above £100,000.

or Caveat Dives?

“Caveat Dives”- rich people beware – is a predictable response from the majority of a population for whom earning more than £100,000 in a year is not going to happen (let alone contributing more than the annual pensions allowance).

But high-earners tend to be very important to organisations and if they stop being productive, as increasing numbers of highly trained medical professionals are doing, then HMRC is shooting the NHS in the foot – the opposite of preventative surgery.

We are running a Pension Play Pen lunch to consider these issues and further explore what the private advisory sector can do to supplement help from employers and from Government agencies.

Details of the lunch for Monday April 1st are available here.

I suspect the answer is “quite a lot” and that’s another reason why you should press the link below and invest in AgeWage.

www.seedrs.com/agewage