Speculation Chancellor will increase pensions allowance

THE Chancellor is understood to be looking at increasing the lifetime pension allowance (LTA) in a move that is being interpreted as attempting to reverse the trend of early retirements.

It is understood Jeremy Hunt is considering allowing workers to put more money into their pension pot before being taxed as part of his Budget package.

Mr Hunt is keen to bolster Britain’s workforce as he looks to deliver on the Prime Minister’s pledge of growing the UK’s stalling economy.

The lifetime allowance stands at £1.07m, with savers incurring tax after that personal pension pot threshold has been exceeded.

Reports differ about how much Mr Hunt could put the LTA up by in his fiscal statement today.

The Times said the Chancellor would hike it to £1.8m, while The Daily Telegraph said it could be set to more than £1.5m

It is also understood the Budget could see the annual allowance rate for pensions increased, with Mr Hunt having tasked his advisers with calculating how much a change would cost the exchequer.

The Telegraph and The Times said the amount each person can save each year before incurring tax was likely to rise from £40,000 to £60,000.

In his Bloomberg speech earlier this year, Mr Hunt vowed to consider fiscal measures that would help the over-50s who had taken early retirement during or after Covid-19 to return to work.

Speaking in January, he said employment levels were lower than they were before the coronavirus pandemic by around 300,000 people.

Mr Hunt said: “So, to those who retired early after the pandemic, or haven’t found the right role after furlough, I say: ‘Britain needs you. And we will look at the conditions necessary to make work worth your while.’”

The pension lifetime allowance was first applied in 2006, when it was set at £1.5 m.

It rose to a peak of £1.8m by 2012 before gradually being cut. It was due to stay at £1.07m until 2026 but Mr Hunt could choose to bring a change forward.

The British Medical Association has called the current LTA rate “punitive” and argued it has encouraged doctors to leave the profession.

In January, former pensions minister Baroness Altmann lobbied ministers to change “illogical” pension rules to help ease a workforce crisis in the NHS.