Jeremy Hunt is supposedly going to announce measures to get those over the age of 50 who have dropped out of the workforce back to work.
To do this he is apparently going to increase the annual pension contribution limit to £60,000, up Fromm£40,000. He us also going to increase permissible pension pots from just under £1.1 million to maybe £1.8 million.
This is undoubtedly going to help some senior doctors. But is it really going to attract almost anyone else back to work? I personally doubt it. But just in case, a poll for the over 50s (please):
Jeremy Hunt is planning to increase permissible pension contributions to encourage those over 50 back into work. Would this make you work again? .
- You have to be joking: I could never use existing allowances (40%, 146 Votes)
- No (27%, 97 Votes)
- Only the Tories could have believed this would work (18%, 66 Votes)
- I’m not 50 yet, but please show me the results (10%, 38 Votes)
- Increased pension contributions won’t bring my NHS treatment forward (2%, 8 Votes)
- Yes (2%, 7 Votes)
- Have you heard of Covid? (1%, 3 Votes)
Total Voters: 365
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I commented in your general budget piece on this. I am glad you have raised it on a separate post because it is emblematic of this government at its most self serving… it takes a lot for me to be shocked but is this really a sensible way to spend money? Of course it is not designed to work.
It is claimed that NHS Consultants are turning down work because of the “pension penalty tax bill” that they are obliged to pay. First, I suspect that NHS Consultants are either too tired or prefer more lucrative private work if they are cutting back on NHS work. If it really were a problem then it ought to be quite possible to pay NHS Consultants with already large pension pots in a way that does not contribute to their pension (and incur extra tax).
What will this cost? Well, 40% of £600k for each person with a pension that is bumping up against the ceiling spread over the 10 years it would take them to reach the new ceiling. Plus 40% of whatever “extra” is put in by others as the cap rises from £40k to £60k. Any idea what that will be?
Also, I have no real idea on the details here but has this “mythical NHS Consultant” really got a problem? They have DB pensions that are valued in today’s money (PV) using a long term interest rate…. which has just moved much higher. Whatever the PV was a year ago it is much less now. Are they really bumping up against this ceiling?
In fairness it is an issue
One I know picked up a bully in ex chess of £20k because rising interest rates increased the value of his pot
Sure, he earns a lot but you can see why a £20k bill for something over which you have no control is hard to take.
He is till working for the NHS, but time serving. Goodwill has gone.
I accept it WAS an issue….. but surely rising rates now REDUCE the PV of the pot. I suspect it was falling rates a couple of years ago that nailed him. Raising the limit now is shutting the stable door after the horse has bolted. Besides, there are so many other ways to solve this particular problem without a blanket increase in Lifetime allowance and annual contribution ceiling.
I entirely understand disenchantment with working for the NHS – I hear it first hand from relatives. A more responsive management/government could have sorted this issue out (and others) very easily.
Surely the way to deal with the issue for senior doctors is to change the rules of their pension scheme, allowing them to work without either contributing or leaving the scheme once they reach a certain level of pension pot. Tax because interest rates have increased the pension pot is irrelevant to whether they continue to work or not.
That would seem glaringly obvious
But the rules of these schemes are absurd
For example I can never have a university pension until I stop any work for a university
Why not allow flexibility?
Timing is an issue. It’s only now, as we near the end of 22/23, that we are beginning to see the tax bills for 21/22. And not all PIA information is available yet. Typical figures, say – Salary £100k; EE Contr £15k; ER Contr £70k. Tax bill £20k.
Whilst the ER funding in 22/23 may well reduce significantly, due to interest rates etc, we won’t know the outcome until a year from now. And today’s changes won’t be reflected in tax bills until around spring 25.
So still lots of discussions with doctors on tax bills to come, and lots of decisions by them on the hours they are prepared to work.
At least we shouldn’t now have those in early 50s considering early retiral due to LTA considerations, such has been the funding into their pot over the years thus far. But they still have considerations on tax bills on annual funding, at a time when their family may be embarking on further studies and in need of financial support.
The trouble with the LTA and consultants pensions is that the total value of a DB scheme for LTA purposes was calculated by multiplying the expected annual pension by 20. So if you expected a DB pension of £20k this would equate to a LTA percentage of 400,00 / 1,073,000 plus the value of any DC pensions. It is right to discuss whether anybody should get a DB pension of £53,0650. Any pensions savings over the £1,073,000 face an immediate tax of 55%.
No one I know who has left the workforce recently telling me that life is too short will be attracted to this. They’ll never boost their pensions anyway since they are not on those sorts of wages.
I know people who have taken their pensions and are being paid cash in hand for work and are on the golf course by Thursday (Wednesday even) whilst I’m still at it.
This is typical Tory tinkering – do anything but actually what you need to do. It’s window dressing and so badly informed – as if at that age all you are bothered about is money.
It’s the quality of your work environment that also matters. And that by experience that is getting worse – not better – in the public sector.
And all we need is the recession, and then the shit will hit the fan in private sector with no robust public sector to keep things going.
A recipe for disaster as you have often said.
And Laboured seem to be nothing but tinkerers too. Great!
The only reason I’m still in work is that I’ve got two university bound kids. If it was not for that I would have retired at 55. Also, as a public sector worker, I’m staying in longer because my wages have declined by a quarter since 2010 so maybe working a bit longer will help that.
But this policy does nothing for me at all.
I agree: this so completely misses the point
So is their actual tactic to so impoverish those who have left the workforce, that they have no choice but to return to work? Is that what all the interest rate hikes and escalating costs are all about? As if work represents a qualify and purpose to life that all of us should aspire to. For a large majority, work is nothing but a bloody chore that grinds you down with the mind numbing banality and futility of it all. How many of us get to do anything that is both truly useful/worthwhile AND adequately rewarded? Very few indeed. And the government wonders why people might seek to opt out of it if they could? Even if it means managing on a meagre pension or an ever diminishing pot of savings?
When I think of all those techno-optimists who promised a future where none of us would have to work and our lives would be nothing but unalloyed leisure, I wonder if they now realise that such aspirations would never have been permitted by those we elect to rule us. No, we must be kept on the perpetual treadmill, pursuing that most elusive of unicorns – unabated, exponential and infinite growth. And if that means impoverishing us to the point of destitution, such that we have no choice but to go back to being grist in their mill, well, it seems that’s a price they’re willing for us to pay.
You summarise the reality
Miss N
I like your analysis but what ‘nudging’ people back into work also does is hide the apparent problems that Tory BREXIT has created too.
The only tiny glint of satisfaction I get is that the mugs who voted for BREXIT did not realise that those underpaid and undervalued jobs immigrants used to do were being set aside for…………………………..them and their kids!!
I mean – what a bunch of suckers eh? You couldn’t make it up.
Come-uppance is a bitch.
Honestly……………..
What an incisive and philosophically acute post. Is life just for work? In Britain that is the politics: “hard working families” as the highest virtue a human can aspire to achieve.
The reality for so many is the ill-paid, unrewarding “mind numbing banality and futility” of the grinding chore; typically because they are working for people with no interest in anything but loadsamoney; so they can retire early and extract themselves from the mind numbing banality and futility of neoliberal Britain.
If you wish to understand Britain just watch the advertisements; gambling, holidays, gambling, bling, gambling, pensions, gambling, and hair shampoo. Inspirational for the higher life.
Hat tip, Miss N.
I may be on the wrong side on this issue (though GP daughter-in-law at 50 is already getting caught).
It may be a symptom of a different and more serious problem.
My understanding is that actuaries of most defined benefit pension schemes value the scheme as if all the assets of the scheme were sold and converted into government bonds.
If government bonds pay an interest rate lower than inflation, it means that an actuary may calculate that a £1 million pension pot will only buy £700,000 worth of index-linked pension. Or less.
I suspect that pay-as-you-go pension schemes may be valuing pension pots using such schemes as their model.
The actuarial thinking doesn’t just hurt doctors, but has a disproportionate effect on younger workers. Schemes like the Universities’ USS regularly reduce the benefits for younger staff, in order to cover the imagined costs of already promised pensions.
It all means more money for Financial Services, both directly through fees, and indirectly from inflated asset prices.
In a sane world, I think we could all have a lot better pensions for a lot less money.
Your cynicism is well placed