Pensions savers are in line for a triple boost at tomorrow’s Budget as part of plans to get over 50s back to work, according to reports.
Chancellor Jeremy Hunt is said to be planning to increase the lifetime allowance from £1,073,100 to over £1.5 million
The annual allowance could also be hiked from £40,000 to £60,000, while the money purchase annual allowance (MPAA) could rise from £4,000 to £10,000
AJ Bell wrote to the Treasury last year warning the low level of the MPAA risked running counter to efforts to increase employment levels among older workers
Tom Selby, head of retirement policy at AJ Bell, comments: “After over a decade of persistent cuts to retirement savings incentives by successive governments, this finally looks like it could be a Budget that boosts pensions for hard-working Brits. Reports of senior doctors retiring early due to the impact of pension tax allowances – in particular the annual and lifetime allowance – have undoubtedly been of particular concern to the government given the pressures already on the health system following the pandemic.
“Raising the lifetime allowance beyond £1.5 million and the annual allowance to £60,000 would significantly reduce the risk of NHS staff being hit with a pensions tax charge for working extra hours. However, both the lifetime and annual allowance apply across all types of private pensions and so this announcement would increase the retirement savings limits for millions of Brits.
“It’s worth remembering that in 2010/11 the lifetime allowance stood at £1.8 million and the annual allowance £255,000, so even these increases wouldn’t take us back to those halcyon days. Nonetheless, any rise in allowances would represent a major and welcome departure from recent trends.
“The money purchase annual allowance (MPAA), which applies to those who flexibly access their private pension post-55, is set at such a low level it risks acting as a significant disincentive to work. Given the challenges facing the UK economy this is clearly undesirable, and so raising the MPAA back to £10,000 – the level it was originally introduced at in 2015 – would be a sensible, pragmatic step.”