Skip to content

Commentary - Annual Allowance

Commentary - Annual Allowance

Following today's Budget announcements relating to the Annual Allowance threshold being increased to £200,000, we spoke with experts from across Wesleyan Group to canvas their initial thoughts.

Ian Macvie, Technical Manager at Wesleyan, said: "Anything that reduces the likelihood of individuals in the NHS being hit with large tax bills for saving into their pension is a good thing.

"As a measure to address the impact of the tapered annual allowance on the NHS, it is a big step in the right direction. Calculations around the annual allowance and taper are very complex, but if a clinician's threshold income - the combination of their gross taxable income from all sources, minus tax-relievable contributions such as personal pension contributions - is now less than £200,000, they will retain the standard annual allowance of £40,000.

In addition, this means even if the new threshold income of £200,000 is exceeded, the taper will only start to apply where the individual's adjusted income (basically, their threshold income plus the value of the individual's pension savings) exceeds £240,000.

However, it is disappointing the tapered annual allowance has not been completely abolished, especially now the thresholds are now so high they will only effect a small minority of exceptionally high earners - it would have much simpler to just scrap the taper tax."

"We expect that the vast majority NHS staff will now come under this new threshold, giving the vast majority of hardworking doctors and clinicians much needed headroom. However, simply raising the taper thresholds doesn't go quite far enough in our view and we would of preferred for the tapered annual allowance to be scrapped completely."

Parminder Gill, advice policy consultant at Wesleyan, also commented:

"The tapered AA remains but the significant increase in the underlying threshold of £90,000 is substantial and will take many doctors (98% according to the government) out the firing line. The complexity of the tapered rules remain in place and may not please those that wanted the taper to be scrapped.

"However, the announcement it is a positive one for many doctors and one that now means you have to earn over £200,000 before potential being impacted by the tapered AA with the reduction in AA taking place once income, together with pension savings, exceed £240,000 instead of £150,000."

If you would like further information on any of the topics covered in our overview, book a one-to-one meeting with your local Wesleyan Financial Services Consultant at a time and place that suits you.

Please call 0800 980 0522, quoting 1002367 (lines are open Monday to Wednesday from 8am to 8pm, Thursday 8am to 7pm and Friday 8am to 5pm).

Find Your Financial Consultant

Financial Consultant Form

More information about FCs

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

Click for more information about the Wesleyan group of companies.

© 2020 Wesleyan Assurance Society