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NHS not alone in pension dilemma – judges affected too

Emma Lunn
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Emma Lunn

Complex pension rules risk intensifying staffing pressures in the UK judicial system.

The case against the government’s controversial pension annual allowance taper is growing, as figures show a quarter of judges breached the annual allowance on pension contributions in 2017/2018.

A freedom of information request from wealth management firm Quilter found that of the 2,978 judges in the UK, 764 members of the judicial pension scheme went over the annual allowance in the 2017/18 tax year.

The annual allowance affects individuals saving into a pension and restricts the amount they can save tax-free in any given year. The annual limit was in excess of £250,000 as recently as 2010/11, but it has since been cut dramatically and now stands at just £40,000. A tax charge is applied at their marginal rate of income tax on any pension contributions over the annual allowance.

For higher earners an additional ‘taper’ brings the allowance down further. Introduced in 2016, the policy sees savers lose £1 from the annual allowance for every £2 of remuneration over £150,000. It reduces down to just £10,000 for individuals with total earnings of £210,000 or more.

Pension rules mean staff shortages

The policy change has already created resource strain in key services such as the NHS, where senior clinicians are facing huge tax bills due to the policy. Many surgeons are turning down overtime shifts as a result, and some considering early retirement.

In April last year, lord chief justice Lord Burnett of Maldon made a statement before a Lords select committee citing pensions and increasingly heavy workloads as problems threatening judicial recruitment resulting in extra strain on the justice and court system. In June this year, secretary of state for justice David Gauke also stated that about 10 per cent of High Court judicial positions remain unfilled and cited pensions as a contributing factor.

Ian Browne, pensions expert at Quilter, said: “There has recently been a huge outcry from the medical profession as rafts of people have breached the annual allowance and are subsequently forced into a tax penalty. The result is doctors are choosing not to do overtime, putting strain on an already creaking NHS.

“However, our data shows other essential public sector workers such as judges are also starting to suffer with the unintended consequences of an intricately layered tax system in need of simplification. The knock on effect of this is that public sector workers are disincentivised to join these types of roles or increase their hours putting these systems under immense pressure.

“Anyone that may be affected by an annual allowance charge should think about seeing a financial adviser. They can help ensure you are making the most of your tax allowances and could save you huge sums.”