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Law enforcement leaders are considering leaving the service at a rate of four in 10 in a dispute over pension tax rules, as they call on the Government to give them the same special treatment as NHS staff.
The Treasury is reviewing controversial limits on pension saving for those working in the health service, after Telegraph Money revealed they risked 10pc of doctors quitting, creating an "absolute crisis" that would leave it struggling to care for patients as the number of junior replacements falls.
This newspaper can disclose that hundreds of chief superintendents, the top end of senior operational leadership who run police stations and actively lead teams that solve crimes from counter-terrorism to major incidents, are also being affected by the some parts of the rules.
It follows reports the Armed Forces face similar issues, and comes as Prime Minister Boris Johnson has pledged to put 20,000 more police on the streets to cut crime and reverse a decade in which the same number have been lost.
Pension incentives are one option being considered to entice police officers about to retire to stay and help hit Boris Johnson’s target in three years.
Daniel Murphy of the Police Superintendent Association (PSA), which has 1,200 members, said: “We are simply being punished. We’re finding just an inflation pay rise can mean at the end of the year they are getting a tax bill.”
Police pensions accrue the largest amount in the last 10 years of service, in what is known as double accrual, a system used to retain police for full service and to encourage them to rise up the ranks.
Receiving higher pension payments due to long service is triggering breaches of the annual allowance, a limit on retirement saving set by the Government at £40,000 a year for most people but which can fall to £10,000 for the highest earners.
These limits have been repeatedly cut in recent years, meaning many more people are falling foul of the rules. Those in defined benefit, or “final salary”, schemes, which includes most public sector workers, are hardest hit because the amount they save is linked to their earnings and is inflexible.
A survey by the PSA in 2018 found 44pc of respondents had received an annual allowance charge in 2017/18. This is almost double the year before and up from just 9pc in 2015/16.
Last year, 45pc of those surveyed registered dissatisfaction with their pension, up from 36pc in 2017 and 31pc in 2016. A growing number are considering leaving as a result. Almost four in 10 said pension issues were increasing their intention to leave in 2018, up from three in 10 the year before.
More than half (56pc) of respondents attributed this to the annual allowance, up from a third in 2017.
Earlier this month the Government said it will be reviewing the tapered annual allowance, which affects the highest earners and has been a problem in the NHS, and the judiciary.
Mr Murphy said the standard annual allowance was a bigger problem for senior police, preventing them from taking promotions.
He said: “Everyone is saying, ‘I’ve decided to take on more responsibility and I’m getting a higher tax bill than I am in pay’."
“We have been speaking to the Home Office since January 2017 to say this taxation system is punishing chief superintendents significantly and to ask that they engage, which it has, but has provided no solutions.
“We are putting through suggested solutions and hoping for them to open a consultation similar to the NHS. There needs to be a change to the pension mechanism.”
An initial solution put forward by the Government for the NHS was for the scheme to be made more flexible so staff can halve their rate of pension contributions so the pension growth is reduced by the same level to avoid breaching their allowances, known as the 50:50 model.
This was rejected by doctors’ unions, but Mr Murphy said would be considered by the PSA.
He said: “The 50:50 pension rate proposed for the NHS would be one of the options, but this doesn’t solve the whole problem because it means you have to work longer to get the same pension. You are working more years just to reduce your tax.”
Telegraph Money understands the government is assessing the impact of pension annual allowance rules on the delivery of all public services.
A Treasury spokesman said the matter of pension tax rules "would be considered in the round".
laura.miller@Finance.co.uk
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