The Conservative party will hold reviews of the tapered annual allowance and net-pay schemes if it is elected back into government, it has said.
The ruling party’s manifesto, published yesterday (25 November), also outlined plans to reintroduce the pension schemes bill, and raise the National Insurance threshold to £9,500 next year.
The party pledged to “address the ‘taper problem’ in doctors’ pensions” – an issue which has caused many senior NHS clinicians to reduce their working hours and turn down extra work in order to avoid exorbitant tax bills. A future Conservative government would “hold an urgent review” with the British Medical Association and Academy of Medical Royal Colleges to solve the problem.
It also said it would “conduct a comprehensive review” on how to “fix” an issue where savers in net-pay schemes do not receive the same level of tax relief on pension contributions as savers in relief-at-source schemes.
The Conservative manifesto said this was a “loophole” that particularly affected women earning between £10,000 and £12,500; these savers are not taxpayers, but would be eligible for 20% tax relief on contributions in a relief-at-source scheme.
Pensions and Lifetime Savings Association (PLSA) director of policy and research Nigel Peaple welcomed the review.
“The discrepancy means automatic enrolment (AE) contributions for savers who earn between £10,000 and £12,500 are more expensive for those on net-pay arrangements,” he said. “It is our view that this can be fixed by adjusting the data gathering system used by HM Revenue and Customs.”
Elsewhere, the party said it would retain the triple lock on the state pension, and “unlock long-term capital in pension funds to invest in and commercialise our scientific discoveries”.
It also suggested it would reintroduce the pension schemes bill, which was introduced to Parliament in October to expand the powers of The Pensions Regulator, legislate for collective defined contribution schemes, and set out the parameters of a pensions dashboard. The legislation was lost at the dissolution of parliament.
Raising the National Insurance threshold would also have a wider impact on pensions policy, impacting how much people will need to earn a week to contribute towards their eligibility for a state pension.
The lower earnings threshold for AE, currently set at £6,136, is also tied to National Insurance and a rise in this would mean a lower amount of earnings are pensionable.
Aegon pensions director Steven Cameron said the National Insurance change would be welcomed as a boost to take-home pay, but added: “However, under current rules, those not paying any National Insurance lose out on credits towards their state pension.
“Individuals need 35 years of qualifying National Insurance contributions to receive the full state pension with those with fewer qualifying years seeing a reduction and receiving none if they have fewer than 10 years of credits.”
The Conservative party was the final of the major parties to unveil its policy pledges, with Labour and Liberal Democrat policy documents published last week.