UK Edition
Thousands of teachers are latest victims of pensions tax traps
The complex regime has been a nightmare for doctors– now it is hitting high-earning teachers
Thousands of teachers have been hit by hefty tax bills for paying too much into their pensions after the stringent rules caused havoc for NHS doctors.
High-earning teachers are just as much at risk as doctors of falling foul of pension rules that restrict how much savers can funnel into their pension each year.
There were 3,465 people in the Teachers’ Pension Scheme who breached their “annual allowance” in the 2018-19 tax year, while more than 6,000 exceeded the limit in the previous year, according to Department for Education data from Freedom of Information (FOI) request.
All state schoolteachers are part of the pension scheme, which is also used by most private schools. Savers can put up to £40,000 a year into pensions while qualifying for tax relief.
But the allowance is reduced by £1 for every £2 of “adjusted” income over £150,000, down to a minimum of £10,000, under a “taper” regime. Jon Greer of Quilter, the wealth manager, which sent the FOI request, said the “main problem” was that teachers might be inadvertently breaching the annual allowance.
This has already led to NHS doctors and consultants reducing their hours to avoid triggering tax bills, or even taking early retirement. There is now concern that senior teachers may also be forced to retire early or refuse additional paid work.
“It’s not just about the doctors. The proportion of members of the Teachers’ Pension Scheme who are exceeding the annual allowance is high – like what we’ve seen in the NHS scheme,” said Mr Greer.
Separate figures have shown that 16,793 members of the NHS Pension Scheme breached the annual allowance in the 2018-19 tax year.
Mary Bousted of the National Education Union said unexpected tax bills were taking too much valuable attention from teaching. She said: “We should try to avoid these issues causing the same problems in teaching as they have in the NHS.
They are affecting growing numbers of senior leaders, in part because the annual allowance has been frozen since April 2014.” In December, the Government promised to conduct an “urgent review” of the tapered annual allowance.
The Treasury has confirmed that the review is in progress ahead of the Budget on March 11. The Department of Education declined to comment and said it was a matter for the Treasury.