Steve Webb, Director of Policy at Royal London said: “Whilst today’s review was mainly about public spending, the new Chancellor should have used this opportunity to remedy an urgent tax problem – the impact of pension tax relief rules on higher earners in the NHS and across the public sector. NHS services are now being seriously impacted by GPs and senior doctors choosing to retire prematurely or cut hours because of tax relief limits. This issue needs to be addressed as a matter of urgency. Today’s statement was a missed opportunity to address that urgent problem”.
Steven Cameron, Pensions Director at Aegon comments: “The Battle of Brexit may have brought Parliament to a halt, but it hasn’t slowed down the trend towards longer life expectancies and an increasing number needing care in later life. While local councils will no doubt welcome the £1.5bn boost in the coming fiscal year, this is a temporary stop gap, falling far short of the £8bn the House of Lords reported was needed to restore services to 2009/10 levels.*
“But as the Chancellor admitted, this ‘down payment’ doesn’t in any way reduce the critical need for a fundamental review. The scale of the issue is more heart surgery than sticking plaster. We need to arrive at a new, fair and sustainable deal on social care funding which will allow people to understand and plan ahead for their contribution should they need care. Fixing this huge problem area must be a priority for Government and the millions of families awaiting a new deal while struggling week by week to provide care and dignity to elderly relatives.”
“While the Chancellor’s additional funds for the NHS will be welcomed, he offered no solutions to the NHS pension scheme issues which are causing a dangerous drain on talent. As a result of the ‘tapered annual allowance’, which gradually reduces the amount which can be paid into pensions from £40,000 to £10,000, highly paid professionals are turning down extra work or retiring early to avoid big tax bills.
“While the NHS needs money, it also needs to retain its talent. It can’t be right that a little known technical pensions rule is putting that at risk. We urge any doctor considering retiring early to first seek professional financial advice.
“While the immediate priority may be to stop this NHS talent drain, the issue affects individuals across employment sectors. A solution which picks certain occupations for special treatment would be unfair and divisive. This means we need a solution which applies across the country, encouraging rather than penalising saving for retirement.”
Matt Davis, Partner at Hymans Robertson, the leading pensions and risk consultancy comments on the Chancellor’s commitment to consult on the future of RPI: “The Chancellor’s announcement today will likely inspire some mixed feelings amongst pension scheme trustees and sponsors. On the one hand, schemes that provide RPI-linked benefits who haven’t put in place much hedging may see improvements in funding levels, if it turns out that this announcement leads to a drop in RPI expectations. On the other hand, schemes that have hedged CPI-linked increases with RPI-linked assets, which is a common risk management approach, could see funding positions worsen, to the extent that this news hadn’t been fully priced into the market.”
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