Message for the Senior Lecturer

A pension tax trap has hit the Armed Forces, as leaders say it has affected thousands of service personnel. A former defence minister revealed that some senior soldiers had even spurned promotions rather than face a financial loss as a result of the pension rules.

Between 2017 and 2018 there were 3,840 members of the armed forces pension scheme who breached their annual tax-free pensions savings limits.

Earlier this month the Treasury said it would review the controversial tax rules on pensions introduced by the former chancellor, George Osborne, which sees higher earners restricted from putting more than £10,000 annually into pensions without facing taxes.

Marginal tax rates really do actually matter…….

9 thoughts on “Message for the Senior Lecturer”

  1. Pension trap? Soldiers used to be left as Peg-Legs begging on street corners –the ones who lived. I wonder how many former members of the British Army would trade being caught in a “pension trap” for what did happen to them.

  2. My understanding of this (as it affects the NHS) is that it isn’t even marginal tax rates – it’s a threshold at which an additional £1 into the pot costs thousands. So a marginal tax rate of over 100%.

    Am I misled?

  3. Bloke in Berkshire


    As one’s earnings increase (over a certain threshold) the maximum amount of contributions on which tax relief is allowable decreases down from £40k to £10k and so it is possible to end up in a position of owing tax on contributions already paid.

  4. Georgie Osborne’s £1m pension cap is brilliant. One wonders if he designed it specifically to show to everyone exactly how much State employees are squirrelling away of everyone else’s cash in the form of their pensions. I suspect not, but the effect has been to make people who have incomes many times that of the average punter start complaining about their £1m pension pot as well. I mean, thats really going to get normal people’s sympathy isn’t it?

    ‘Hey Steve, have you read this, Brigadier Bloggs gets paid £100k/yr and he’s worried he can only have £1m in his pension pot before having to pay more tax’

    ‘I know Bob, its a worry to us all.’

  5. “One wonders if he designed it specifically to show to everyone exactly how much State employees are squirrelling away of everyone else’s cash in the form of their pensions.”

    Of course, most public sector workers have £0 actual cash in a pension pot. It’s all future liabilities to be paid by future taxpayers.

    Hey, why not be generous with public sector pensions? By the time the financial shit hits the fan, those who have been generous will be long gone from having to sort the mess out.

  6. How much do these 3,840 need to be earning p.a. to be subject to the taper ? 110k ? 150k? I thought the forces faced a funding crisis ?

  7. for an encore, how about councils that let properties worth 1m plus on de minimis rents are not eligible for any central govt top ups.

  8. The taper starts at earnings of £150k, where every £2 over that limit reduces the tax free pension allowance by £1, down to a minimum of £10k/year. This means that a salary of £210k would only be entitled to £10k of tax free pension contributions. I think that means they would lose £12k in tax relief.

    So if you are on £150k, a promotion worth £20k would mean a lose of £4k in tax relief, which surely means they’re still £16k a year better off before tax/etc. ??

    Have I missed something obvious?

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