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Health sec pressures Hammond on £1m pension lifetime allowance

Health secretary Matt Hancock has spoken to the chancellor about reforming the £1 million lifetime allowance on pension savings

Health sec pressures Hammond on £1m pension lifetime allowance

Secretary of state for health and social care Matt Hancock has called on the chancellor to reform the £1 million pension lifetime allowance (LTA) after GPs raised concerns with him. 

In an interview with health industry trade publication Pulse, Hancock (pictured) said tax penalties on pension savings above £1 million were the 'biggest concern' raised by doctors he spoke to.

The LTA was cut from £1.25 million to £1 million in 2016. The level of the LTA rises in line with inflation each year, so it is currently set at £1.03 million. 

Individuals who exceed the limit are penalised by a 55% tax rate on lump sum withdrawals of pension savings above £1 million. They also have to pay a 25% tax rate on pension savings above £1 million accessed in any other way on top of the usual income tax charge at their marginal rate. 

As a result of the penalties there have been concerns that since the new limit came into force GPs are retiring earlier because they no longer get any value from contributing to their pension scheme.  

Hancock told Pulse he was aware of these concerns and had raised the issue with chancellor Philip Hammond. 

'The biggest concern raised with me is around the tax treatment of pensions. Of course tax is a matter for Treasury, but I’ve had conversations with the chancellor about looking at the details of tax treatment of pensions because I understand the impact that has,' he said. 

However Hancock did not tell Pulse whether the conversations only included GP pension tax relief or would extend to wider reform of the LTA. 

There have been plenty of calls to overhaul the pension LTA since it was cut in 2016. Last July the influential Treasury select committee said the limit  should be scrapped entirely. Former pensions minister Ros Altmann also spoke out against the LTA during her time in office, but was unable to change the policy. 

Four charts that highlight the LTA planning problem.

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