Jeremy Hunt Scraps Lifetime Cap On Pension Allowance
Jeremy Hunt announced his Spring Budget to the House of Commons (Alamy)
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 provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe