Public sector to escape Starmer’s pension raid

LABOUR is plotting to protect top public sector workers from its planned raid on pensions.

Sir Keir Starmer and Rachel Reeves are planning to reimpose the £1.073m maximum cap on the amount that can be saved into pension free of tax. Savings over this amount face a windfall tax under the so-called lifetime allowance.

However, fears of a public sector exodus have led to Labour drawing up plans to reintroduce the cap “in a way that ensures we retain public sector leaders”.

Senior Labour figures, including Sir Keir, Sue Gray and the husband of Rachel Reeves, the shadow chancellor, are among those who have large public sector pensions.

It is not known if they will benefit from the plan.

Last night, the party refused to reveal details of who would be affected. A spokesman said that “a carve-out for public sector workers” is “not our policy and it will not be our policy”.

They added: “Our solution will reintroduce a lifetime allowance in a way that ensures that we retain public service leaders.”

The confusion over the flagship Labour policy emerged as the party formally abandoned its £28 billion-a-year green investment pledge.

The Labour leader has backed away from a number of key pledges made in 2020 before he became leader, including a commitment to abolish tuition fees, launch a tax raid on tech giants and abolish the charitable status of private schools.

Jeremy Hunt, the Chancellor, scrapped the lifetime allowance cap in the spring Budget last year, following pressure from doctors and other high earners in the public sector, who were retiring early to avoid triggering fivefigure tax bills.

Immediately after the Budget, Labour pledged to reinstate the cap but said doctors would still be protected to avoid an exodus from the NHS.

The reintroduction of the lifetime allowance could affect about 250,000 people, according to analysis by consultancy LCP.

It comes after the size of Britain’s workforce dropped in the wake of the pandemic, driven by a wave of early retirees, as well as long-term sickness.

Labour has said that it is considering options that ensure the retention of both doctors and “other public service leaders” who are “crucial” for delivering its programme of reforms.

Tories said it raised questions around whether Labour’s own MPS and senior advisers would benefit from its “solution”. Sir Keir is estimated to have pension pots worth £1million.

Experts have previously suggested that Sir Keir has a pension worth £700,000 from his time as director of public prosecutions, and roughly

£300,000 saved in his MP pension. The Telegraph revealed last year that Sir Keir was the sole member of a “tax-unregistered” pension scheme during his time as DPP between 2008 and 2013, which placed no lifetime cap on his retirement savings.

It is understood Sir Keir is committed to ensuring he does not have any tax advantage that others do not receive. Sue Gray, the senior civil servant who now works as his adviser, had a pension worth £1.9million as of March 31 last year, according to government figures.

Meanwhile, Nick Joicey, a senior civil servant and husband of Ms Reeves, had a pension approaching the old limit, worth £967,000, as of March 31 2022.

A Treasury source said: “This proposal is nothing more than a hefty tax on private pensions to fund a special carve-out that could well benefit key Labour officials.

“We removed the pensions tax to help keep our top doctors, police officers, military top brass and entrepreneurs in work. Labour will take us back to square one and tax millions into early retirement.”

Paul Bristow, the Conservative MP for Peterborough, said it was important that Labour clarify if Sue Gray would benefit from their proposed pension changes. He said: “It would be quite something that one of the first concrete things they propose is to top up the coffers of senior Labour Party officials.”

Sir Steve Webb, a former pensions minister, said that treating leading public servants’ pensions differently would be unfair to savers who had the same pension but did not work for the government.sir Steve said: “Until now Labour had suggested that if the LTA came back it would come up with an Nhs-specific solution.

“But if the party wants to protect all senior public servants this would be very difficult to implement and unfair to those on identical pensions built up in the private sector.”

A Labour spokesman said: “Labour is committed to reintroducing a lifetime allowance in a [fair way].”