Hunt considers budget pension changes to strengthen workforce

The Chancellor is aiming for an increase in the lifetime old-age pension (LTA), which is interpreted as an attempt to reverse the trend towards early retirement.

The PA news agency understands 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 strengthen the UK workforce as he seeks to fulfill the Prime Minister’s promise to boost the UK’s faltering economy.

The lifetime allowance is currently £1.07 million, with savers paying tax after that personal pension pot threshold is exceeded.

There are mixed reports on how much Mr. Hunt could increase the LTA in his financial report on Wednesday.

The Times said the Chancellor would increase it to £1.8million, while The Daily Telegraph said it could be set at more than £1.5million.

The British Medical Association has called the lifetime allowance a “penalty” for doctors (Anthony Devlin/PA)

It’s also understood the budget could increase the annual subsidy rate for pensions, with Mr Hunt having asked his advisers to calculate how much a change would cost the Treasury.

The Telegraph and The Times said the amount each person can save each year before tax is due is 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 those over 50 who took early retirement during or after Covid-19 to get back into the workplace.

In a speech in January, he said employment levels were around 300,000 people lower than before the coronavirus pandemic.

Mr Hunt said: “So to those who have taken early retirement after the pandemic or who haven’t found the right role after the furlough, I say: Britain needs you.

“And we check the requirements so that the work is worthwhile for you.”

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

It rose to a peak of £1.8million by 2012 before gradually being cut back.

It was set to remain at £1.07million until 2026 but Mr Hunt could choose to bring a change forward.

Budget 2017

Chancellor Jeremy Hunt will present his budget on Wednesday (Joe Giddens/PA)

The British Medical Association (BMA) has described the current LTA rate as “penalty” and argues it has encouraged doctors to leave the profession.

The BMA said on its website: “High contribution rates, significant wage cuts and a severe pension tax regime have not only resulted in excessive costs for membership of senior physicians, but also in their receiving reduced pension benefits.

“This has led to many doctors retiring early or reducing their hours.”

In January, former Pensions Secretary Baroness Altmann campaigned to change “illogical” pension rules to ease a staffing crisis in the NHS.

During a debate in the House of Lords, the Conservative colleague said “even middle earners” found that their “supposedly tax-free pension contributions” “cause them to face huge tax demands which may even exceed the extra income”.

She said this meant that some doctors were “effectively paying to work for the NHS” and that the current system was “encouraging people not to work”.

The Treasury Department said it does not comment on budget speculation.

Meanwhile, the Chancellor has confirmed that £63million will be set aside in his budget to help public swimming pools stay open amid high energy bills.

More than £20m of the annual fund will be made available as grants for leisure centers with pools struggling with immediate cost pressures, while £40m will be earmarked for investments in decarbonisation and long-term energy efficiency measures.

The Treasury said leisure centers with swimming pools are responsible for up to 40% of local authorities’ carbon footprint as bathing water needs to be heated to safe temperatures.

Mr Hunt said: “Rising bills are hitting us all hard and community pools have been thrown in at the deep end.

“I know that millions of people love you. This vital lifeline will keep them afloat.”

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