Higher earners will pour money into pensions following the reforms unveiled in last week’s Budget, according to experts.
The Lifetime Allowance (LTA), dubbed the “doctors’ tax” and standing at £1.07m, will be abolished from April 2024. Chancellor Jeremy Hunt also announced that the annual pensions tax-free allowance will rise from £40,000 to £60,000, while both the Money Purchase Annual Allowance and the Tapered Annual Allowance will be extended from £4,000 to £10,000.
James Jones-Tinsley, chartered financial planner and self-invested technical specialist at Barnett Waddingham, welcomed the hike in allowances. However, he added “it’s a shame the chancellor didn’t mimic his drastic LTA solution and scrap them altogether”, stating that this would have helped “specifically those individuals who have semi-retired and the government would like to get back to work.”
LCP partner Steve Webb said the Budget “represents a sea-change in government policy” and will allow millions of people to save more into their pensions, predicting a “flood of new money into pensions from higher earners”. He continued: “For more than a decade we have seen a series of big cuts to annual and lifetime limits to pension tax relief, resulting in large numbers of people being unable to save more into a pension without incurring an extra tax bill.”
EY pensions partner Russell Laver predicted that while the move will lead “a greater number of people to put more into their pension pot” and benefit high earners, it “will have no impact for the majority of the UK population”.
Mazars partner and head of medical financial planning Nick Nesbitt said the chancellor “had written off two of the key drivers behind the mass exodus of GPs, doctors, surgeons and consultants from the medical workforce”.
