The industry has called on the government to go further with a review of pensions taxation, following the announcement that it plans to give NHS staff full flexibility over its pension accrual, and review the impact of pensions taxation on key social services.

Association of British Insurers head of taxation, Mervyn Skeet, said the review needs to go further.

“Steps to address pension problems which are affecting the smooth operation of the whole NHS are good news but there is no reason to stop there. All hard working people in all occupations should be incentivised to save into a pension, whatever their level of earnings. Poorly designed tax rules can have the opposite effect and result in double taxation for some pension savers. A wider review should look at how to fix and simplify pension tax allowances for all.”

The government has also been told to stop with a ‘whack-a-mole’ approach to pensions taxation by Hargreaves Lansdown head of policy Tom McPhail,who also added that the situation with NHS being discouraged from working overtime due to tax charges is ‘plainly bonkers’.

This sentiment was echoed by AJ Bell senior analyst, Tom Selby, who said the government has got itself into a ‘real mess’ over the pension tax taper.

“For months the Treasury has insisted the horrendously complicated taper was a central part of the system and here to stay. While today’s announcement from recently appointed Chancellor Sajid Javid isn’t quite a U-turn, it represents a significant shift in position from his predecessor Philip Hammond.

In addition, the potential for medical professionals specifically being offered special concessions, has been described as worrying by Aegon pensions director Steven Cameron.

“One suggestion is they might be exempt from the tapered annual allowance which reduces maximum pension contributions for those earning above £110,000. These highly complex rules are affecting an increasing number of individuals across many employment sectors, public and private. We recognise the hugely important contribution to society medical professionals play. But this should be reflected in their pay, not through some concession linked to tax rules on pensions.”

Royal London director of policy, Steve Webb, added: “After months of pretending that there wasn’t a problem, and months more of suggesting that a tweak to the NHS pension scheme was all that was needed, this u-turn is welcome. In particular, the suggestion of a review of the ‘tapered annual allowance’ is long overdue. This problem is not unique to the NHS nor even just to the public sector, and so any review must be comprehensive and cover everyone affected by this absurdly complex taper, including in the private sector. The best solution by far would be outright abolition, even if this meant a slightly lower annual allowance across the board.”

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