Why is there no action on killer pension tax issue?
Philip Fisher examines the complex conjunction of pension and tax rules that have led doctors to work to rule this summer.
It is an unfortunate fact that over the years the British tax system will have led to the demise of a number of individuals.
In the past, these will have fallen into two distinct categories. First, those who got themselves into so much trouble that they took their own lives, unable to face what they expected to be imminent prosecution, destitution or bankruptcy.
Secondly, this writer would be most surprised if stress caused by tax deadlines, disputes and other allied issues has not led to health issues and, subsequently, early death for some taxpayers.
However, the latest issue is rather different. As reported in the media, hospital doctors working in the NHS have discovered that as result of the conjunction of rules relating to their pension scheme and general tax legislation, in many cases putting in extra hours either leads to such a penal tax rate that isn’t worth working or, conceivably, actually leaves them out of pocket.
While many of us believe that doctors have a vocation and love their jobs, given the choice between working 70 hours rather than 60 in a week and receiving no reward or paying for doing so, it is not difficult to understand why most will opt to spend a little more time with the family, watching the Women’s World Cup or Wimbledon.
Frankly, if I was a doctor and knew that overtime was being paid at derisory rates, my natural inclination might be to retire immediately and catch up on 25 years of lost sleep.
If doctors aren’t working and operations aren’t taking place, then surely it is inevitable that patients will suffer, in some cases literally dying because of our tax regime. That is wrong.
This columnist is no pensions tax expert but it appears that there are two relatively simple solutions, either of which will immediately alleviate what seems to be a deeply worrying problem.
First, the NHS could alter its policy with regard to pension contributions, which appear to be compulsory even in situations where an option to decline or defer might be desirable.
Alternatively, a limited change to the tax legislation regarding charges on excess pension contributions would be an equally effective quick fix.
This could either apply purely to those in designated professions or across the board, since many might believe that the current pension tax system is in need of an overhaul, having outlived its usefulness after remaining in place for the standard couple of years.
Why is nobody taking any action on either front? It is possible that much is going on behind the scenes, although that is far from obvious. Is the real problem, like so much to do with tax and every other aspect of daily life in Britain at the moment, down to one dread word?
You can get the impression that no civil servant or politician in or around the Treasury (and arguably elsewhere) is doing any normal, day-to-day work as they are obsessing about Brexit and more particularly the potential consequences should whichever of Messrs Johnson and Hunt gets the plum job then goes for the Halloween horror option of no deal?