Labor is rumored to have reversed plans to reintroduce the lifetime pension benefit, which would boost wealthier savers.
The government abolished the old £1.073 million lifetime allowance last year, but Labor said at the time the party would bring it back if elected.
However, shadow chancellor Rachel Reeves has dropped the proposal from Labour’s manifesto, which will be unveiled this week, according to the Financial Times.
U-turn: Shadow Chancellor Rachel Reeves reportedly won’t return the lifetime benefit
Labor had previously said this was the ‘wrong priority’, but party sources told the FT that reintroducing the surcharge would be complex and increase uncertainty.
We explain the details of the lifetime benefit controversy in our guide to what the election could mean for your pension.
Jason Hollands, managing director at asset management firm Evelyn Partners, said: ‘Labour’s plans to reintroduce the lifetime pension benefit emerged from a somewhat knee-jerk reaction to Chancellor Jeremy Hunt’s surprise announcement that the LTA would be included in his 2023 Budget be deleted.
‘If the reintroduction of an LTA is missing from the Labor manifesto on Thursday, it will be welcome news as the prospect of yet more complicated legislation to resurrect this punishing tax penalty on large pension pots and public sector pensions has been seen over the past year , has created significant uncertainty. for those who are considering whether or not to increase their savings.”
Chancellor Jeremy Hunt has removed the cap on tax-free pension savings from April 2023, but the annual allowance will remain in place. This is the amount that you can deposit annually into your pension and that you are entitled to tax relief on the amount saved.
It increased from £40,000 in April 2023 and is currently £60,000, or up to 100 percent of your annual income, whichever is lower.
The system was largely overhauled to appease senior physicians, who were penalized for extra shifts and overtime, and often faced high and unexpected costs for exceeding reimbursement.
Tom Selby, director of public policy at AJ Bell, said: ‘Labour’s commitment to stability should give savers the confidence to plan for the future.
‘This move also supports wider efforts to boost investment, including in UK businesses.
‘Any pension tax reform introduced by the next government must focus squarely on simplification and encouraging more people to save for the long term.’
Labor and the Tories have both pledged to keep the state pension ‘triple lock’ throughout the next parliament.
The triple lock means that the state pension is determined on the basis of the highest inflation, average income growth or 2.5 percent.
Pensioners recently received 8.5 per cent of their state pension in April, increasing the nominal rate to £221.20 per week or £11,500 per year.