Ben Wilkinson Personal Account

Labour surely can’t resurrect the lifetime allowance – but the alternative is much more sinister

Labour was quick to denounce Chancellor Jeremy Hunt’s move to abolish the lifetime allowance on tax-free pension savings. Perhaps too quick.

The outraged party branded it a “gilded giveaway” that would benefit only the wealthiest 1pc of workers, and promised to promptly reinstate the allowance if it won the next election.

Angela Rayner, the deputy leader, did the radio rounds on Thursday morning, and doubled down on the policy, adding that Labour would grant senior doctors some sort of getout clause so they were not driven to early retirement by colossal tax bills.

But it’s crystal clear to the pensions industry, and financial planners, that attempting to bring back the lifetime allowance would be a stupendously bad idea. The reintroduction of the cap at £1.073m would hit as many as two million savers, consultancy LCP estimates.

Experts have warned that resurrecting the policy would trigger a “stampede” of workers pulling money out of their retirement funds.

Labour’s knee-jerk and irresponsible response to the spring Budget has cast an air of uncertainty over retirement plans and people’s future. The party needs to come clean and admit it cannot reasonably reintroduce the allowance.

Furthermore, tweaking the system to better suit only senior doctors would be quite simply unfair, and would count as another unjustifiable giveaway to wellpaid senior public sector workers who already have the privilege of goldplated, taxpayer-guaranteed, pensions that most of us can only dream of.

Yet even if it does admit defeat, I cannot see Labour giving up just yet. The next question is how the party chooses to target retirement wealth, which it will undoubtedly try to do. In scrapping the lifetime allowance, Mr Hunt has effectively turned the pension into the ultimate weapon against inheritance tax. Retirement savings are inheritance tax- free, and beneficiaries only pay income tax on a pension pot if the saver dies after the age of 75.

The Chancellor has inadvertently risked making pensions worth more