Wed, 29 March 2023

Newsletter sign-up

Subscribe now
The House Live All
Mission Zero: Why the Skidmore Review can kickstart the nation’s journey to net zero Partner content
New guidance empowers construction clients to help drive up standards, collaboration, innovation and value Partner content
How can the UK turbocharge its ambition to be a science and technology superpower? Partner content
By Chris Hayward
Press releases
By Amey

Jeremy Hunt Scraps Lifetime Cap On Pension Allowance

Jeremy Hunt Scraps Lifetime Cap On Pension Allowance

Jeremy Hunt announced his Spring Budget to the House of Commons (Alamy)

2 min read

Chancellor Jeremy Hunt has scrapped the £1m cap on the pension lifetime tax allowance in a bid to incentivise over 55s, particularly doctors, to stay in the workplace.

Hunt said while there had been speculation that he intended to "increase the lifetime allowance from its £1m limit", today he said he would "go further and abolish the lifetime allowance". 

He also increased the yearly tax free pension allowance from £40,000 to £60,000 - meaning wealthy pensioners are among the biggest winners of today's Budget. 

It was expected that Hunt would make changes to both the lifetime and yearly pension allowance, with the limit on the lifetime allowance expected to hit a maximum of £1.8m.

The changes to pension taxes are designed to incentivise people like doctors where there are shortages, to stay in the workplace instead of retiring early in order to avoid tax penalties on pensions – as well as tackling increasing economic inactivity. 

Vishal Sharma, chair of the British Medical Association (BMA) pension committee, welcomed the announcement. 

"The scrapping of the lifetime allowance will mean doctors will no longer be forced to retire early because of pension tax," he said. 

Torsten Bell, chief executive at the Resolution Foundation, said the changes were a "massive giveaway". 

"Plan to keep older workers in work is VERY focused on high income public sector workers: not just raising but scrapping the lifetime cap on pension pots," he said on Twitter. 

"Massive giveaway to around 8,000 people a year. Also raises annual allowance to £60k."

James Kirkup, director of the Social Market Foundation, said it was a "huge giveaway" to "very wealthy people". 

"The lifetime allowance currently affects around 8,000 people who are fortunate enough to have £1.07m in their pension pot(s)," Kirkup tweeted.

"Most are doctors. Abolishing LTA [the lifetime allowance] may well help NHS staffing, but it's also a huge giveaway to a very small group of very wealthy people."

Paul Johnson, director at the Institute for Fiscal Studies, told the BBC's PoliticsLive he believed the pension changes would make "very little difference" to the issue of economic inactivity in the UK. 

PoliticsHome Newsletters

PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe

Read the most recent article written by Nadine Batchelor-Hunt - Jeremy Corbyn Formally Banned From Standing As Labour MP


Engineering a Better World

The Engineering a Better World podcast series from The House magazine and the IET is back for series two! New host Jonn Elledge discusses with parliamentarians and industry experts how technology and engineering can provide policy solutions to our changing world.

NEW SERIES - Listen now