“I understand it happened, particularly to doctors who had long service,” she said. “If they did work in a DB scheme, the way that the accrual works meant that they would be subject to an annual allowance charge on the accrual. The accrual means they're not getting the money and you are getting people whose net income after tax, from the work they were doing, was entirely being swallowed by then having to pay the annual allowance charge.
“So effectively, they're saying 'why would I work because the effect of it is that my pension goes up, but I haven't got my pension'. The effect of it is I have to pay the government money to work or not get a salary.”
Connor said that is obviously an issue for people but it is to do with the annual allowance.
“As I understand it, that was the biggest complaint,” she added. “I'm not saying people wouldn't like to not have an LTA but in that particular problem, the annual allowance was the issue.”
The LTA reasoning
She said if this was the issue the government was trying to resolve, the LTA doesn’t necessarily get them there.
“I do wonder if part of the motivation behind the people in Treasury signing it off is the cost reward ratio, the cost benefit analysis,” she said.
“I was told when I started off as a lawyer that the government's favourite tax is stamp duty because stamp duty is a voluntary tax you don't have to pay.
“It’s just if you don't pay for those things you're not allowed to do things. For example, if you buy a property, you don't have to pay stamp duty but if you don't, you can't register your ownership and can't get a mortgage and you'll have difficulty proving you own it and it'll be really hard to sell. But you don't have to pay the tax.”
She explained that because it's a voluntary tax, people self-police so the government doesn't have to spend a lot of time chasing people for their failure to pay.
“So you don't really have to make much money from stamp duty as a government for the Treasury to like that as a tax because the reward compared to the cost of managing it is extremely high,” she said.
“I'm not criticising it but that is an analysis and I do wonder if the LTA charge is expensive and doesn't bring in a great deal.”
She explained that if you look at the LTA structure as a whole, it is quite complex.
“It's a lot of effort for us but it's also quite a lot of effort for HMRC. They've got all these notifications coming in and then keeping an eye on all this stuff and having to check this number against that number the whole time.
