Jeremy Hunt’s latest Budget Statement focused on encouraging those who have left their jobs to return to the workforce, as well as increasing business investment. Among the many new measures detailed, one in particular aimed to help make the decision to return to work easy for many doctors who had previously left their jobs for tax reasons by boosting the amount high-earners are allowed to save tax-free. On the surface, this seems like a great idea, however, this was not met with enthusiasm as many are questioning just how many people this will actually help.
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What is changing?
The Chancellor announced the abolishment of the pensions lifetime allowance, the current limit on how much someone can amass in their various pension pots while still enjoying tax perks over their lifetime.
Until recently, any amount saved over £1.07m across all personal and workplace pensions (not including the state pension) was subject to a tax charge of up to 55%. This limit was meant to have stayed frozen until 2026 and despite rumours that the allowance would increase following the announcement, Hunt opted to eliminate it entirely.
Additionally, the annual allowance threshold limit is increasing. Which means that now you can save up to £60,000 into your pension pots every year without any worry of paying tax.
Not without criticism
The Treasury have asserted that this idea was proposed to help retain vital NHS staff, but upon further research, experts are sceptical that this will have any real impact and have suggested this will only really benefit the super wealthy.
According to figures provided by junior health minister, Will Quince, there were only 105 doctors who left the NHS voluntarily in 2020/21, in addition to 561 nurses and 20 health visitors. While over 8,000 departures have unknown reasons, the top reasons given by those who left was that they reached the end of a fixed-term contract, they hit retirement age, or they were simply relocating. Not among the top reasons for leaving were tax implications, so exactly who will stand to benefit from these changes remains in question.
Need to take action?
If you’d like to review your current financial plan as a result of the latest Budget, don’t hesitate to get in touch with your trusted financial adviser. Contact the experts at Dental & Medical Financial Services now to get started.