Why Hammond cannot scrap the pensions taper.

 

It is odd that Paul Masterson welcomes a flat “no” to his request to scrap the taper.

What we are likely to get instead is more options for the payment of contributions to the NHS pension scheme. This will further complicate – rather than simplify pensions.

I suspect that there is more than a little scepticism in Masterson’s tweet.


Politics v common sense

Common sense says scrap the taper, if it is likely to bring in £6bn in lost revenue, it is likely to lose as much in lost productivity from doctors and others who see another cap on their pension. That is Masterson’s point.

Politics says that giving tax breaks to the highest earners does not play well to the country or to those further down the NHS food chain.

We cannot expect common sense when the pension taxation system is held together with sticking plasters like the tapered annual allowance.

The great failure of the last five years, was the failure of George Osborne to properly reform pension taxation when he had the chance in 2015.

So long as we continue with the current Heath Robinson system – the solutions to problems such as that outlined by Paul Masterson will benefit only the pension consultants paid to sort the mess out.


Why didn’t we get pensions tax reform in 2015?

There is a single word answer “BREXIT”. Plans to create a simple system that would have fairly redistributed tax relief were ditched in 2015 for fear they would alienate the conservatives striving for BREXIT.

Pensions – like so much else – were sacrificed to get a Remain vote. That vote never happened , nor did pensions simplicity.

We are now paying the price for the weakness of the Government in those days.

Philip Hammond is left with cleaning up the mess – but the mess only gets worse. As a pension consultant, I should be pleased for the extra work but I’m not. We risk damaging pensions still further so long as this stupid taper persists,]

The same can be said of the net pay anomaly.


Are we likely to see an improvement?

Only in the longer term. There is little prospect of having a Government that returns to governing matters such as pensions with the strategic vision we last saw with the implementation of the Hutton report.

For now, we have to live with stupid pension taxation.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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