Two million to benefit from lift in pension pots
Chancellor Jeremy Hunt is looking to increase the lifetime allowance for pension savings to discourage early retirement as part of a “Back to Work” package to be unveiled in tomorrow’s Budget.
Mr Hunt wants to allow workers to put more money into their pension pot before being taxed. The lifetime allowance (LTA) has a £1.07 million ceiling, with savers incurring tax beyond that threshold. He is expected to raise the limit to between £1.5m and £1.8m.
Nearly two million people will benefit from the move. Increasing the allowance means that people could avoid paying as much as £180,000 in tax on their pension pots when they draw money.
He may also raise the annual allowance – the amount each person can save each year – before incurring tax from £40,000 to £60,000.
The British Medical Association (BMA) has called the current LTA rate “punitive” and argued it has encouraged doctors to leave the profession.
On its website, the BMA said: “High contribution rates, significant pay erosion, and a punitive pension taxation system have resulted not only in an exceedingly high cost of scheme membership for senior doctors, but also in them receiving reduced pension benefits.
“This has resulted in large numbers of doctors retiring early or reducing their hours.”