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Pension Tax Update

Government announces “major overhaul of the NHS pension scheme”.  So what for us?

”Our doctors must be fairly rewarded for their work and not fear they will be hit by an unexpected tax bill”, writes Matt Hancock MP, Secretary of State for Health and Social Care in today’s Daily Telegraph.

In his article he further states that the government is “taking action to give clinical staff at risk of pension tax bills – top doctors and nurses, surgeons and GPs – full flexibility over the amount they put into their pension pots as part of a major overhaul of the NHS pension scheme.”  The article goes on to say that: “in addition to these changes, the Treasury will review how the annual allowance taper tax policy operates to see how we can better support vital public services like the NHS.”

This is clearly welcome news but what could this mean for Armed Forces personnel who have been caught up in the Pension Tax trap?  This announcement is primarily focussed on those higher earners (£110K + p.a.) who are affected by the complex ‘tapering’ rules that incrementally reduce the amount of allowable annual tax free pension savings from £40K down to a lower limit of £10K. It remains to be seen if the government has the appetite to raise the current threshold of £40K which has led to several thousand serving military personnel finding themselves being potentially caught in this ‘tax trap.’  It is this aspect of Pension Tax policy we have a particular issue with.  Our Chief Executive remains an active member of the Public Service Pension Tax Working Group and is working with his opposite numbers to determine a joint position. We have already written in response to previous media coverage of this issue which you can read below.  We will keep you posted.


 Laura Miller’s article ’Scrap these ludicrous pension tax rules’ (Telegraph Money Saturday 13 July) highlights the impact Annual and Lifetime Allowance rules are having across the Public Services. In the Armed Forces this now includes both commissioned and non-commissioned ranks and those on relatively modest salaries. In 2018 several thousand Service Personnel received a notification letter stating that they might have exceeded their Annual Allowance limit and for many this translated into a significant tax charge – well before receiving any of the future pension on which the tax is levied.  

The Forces Pension Society continues to support its Members and the Armed Forces community as they navigate these tricky waters. Those who join the Armed Forces sign up to the principle of Selfless Commitment; putting collective endeavour in the national interest ahead of personal considerations – a principle which also extends widely across the Public Services. That commitment must be reciprocated through the provision of appropriate and fair pay and conditions of service rather than eroded through a pension tax policy that is damaging the whole public sector. A policy review is well overdue.

Major General Neil Marshall OBE
Chief Executive
Forces Pension Society, 68 South Lambeth Road, Vauxhall, London SW8 1RL 

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