UK political party Labour has said that it would reinstate the pension lifetime allowance cap following the announcement by chancellor Jeremy Hunt in the Spring Budget that the UK government will remove the cap.
The lifetime allowance is the total figure Brits can build up in all pension savings without incurring a tax charge.
Shadow chancellor Rachel Reeves described the move as “the wrong priority” and as a tax cut for the rich.
The cap currently stands at £1.07m ($1.3m, €1.23m). Hunt was expected to raise the threshold to £1.8m – but he scrapped the allowance instead.
The lifetime allowance charge will be removed from April 2023 before the allowance is abolished entirely from April 2024.
Hunt said during the Budget: “No one should be pushed out of the workforce for tax reasons.”
The maximum tax-free cash someone can take will be frozen at the current level of £268,275 as part of the reforms.
Political ping pong
Andrew Tully, technical director at Canada Life, said: “You simply can’t play political ping pong with the pensions system. People plan for the long term and that relies on having confidence that the goal posts won’t constantly shift.
“We need cross-party consensus on issues like this to deliver the stability required or else we seriously risk wrecking savers’ retirement plans.
“There are already restrictions in the system limiting pension savings and tax breaks − just let the annual allowance do the job its designed to do.”