Labour has today committed to reversing the changes to the
pensions lifetime allowance announced in yesterday's Budget, a
policy which will result in the top one per cent of pension
savers getting a massive tax break for their retirement.
Shadow Chancellor has called the plan “the
wrong priority, at the wrong time, for the wrong people” and
urged the Chancellor to reverse the move.
Labour has said they would encourage doctors to stay in work by
creating a targeted scheme as the government has done for judges,
rather than create free-for-all for the wealthy few.
The commitment comes as the party released analysis showing that
the scrapping of the lifetime allowance, which is only one part
of the one billion pound bung for the wealthiest pension savers
announced in the Budget, could see the richest one per
cent of those accessing their pensions next
year net an average of £45,000.
The Chancellor’s largesse was announced just minutes before grim
new figures from the Office for Budget Responsibility showed that
the real disposable income of average UK households has fallen by
£1,500 since the start of the pandemic.
Jeremy Hunt’s handouts will also mean that people with more than
£1.4 million in their pension pot are able to pay up to £150,000
less in tax. It comes as basic rate taxpayers face an extra £650
in tax next year, and the country’s overall tax burden was
projected upwards yet again.
The lifetime allowance measure alone will cost the taxpayer more
than £70,000 for every person forecast to return to the labour
market as a result of the policy.
Labour has also highlighted that the change could add another
loophole that allows the wealthiest to avoid paying their fair
share in inheritance tax.
MP, Labour’s Shadow
Chancellor, said
“The Budget was a chance for the government to unlock Britain’s
promise and potential. But the only surprise was a one billion
pound pensions bung for the one per cent, a move that will widen
the cost of living chasm.
“At a time when families across the country face rising bills,
higher costs and frozen wages, this gilded giveaway is the wrong
priority, at the wrong time, for the wrong people.
“That’s why a Labour government will reverse this move. We urge
the Chancellor and the Conservative government to think again
too.
“Labour will build a better Britain by securing the highest
sustained growth in the G7, with good jobs in every part of the
country.”
Ends
Notes:
- The OBR EFO notes that in 2020-21, nearly 9,000 people paid
charges under the LTA, with a total value of £400m. That means
the average payment among that group was c. £45,000 – which would
not be paid if the LTA was scrapped.
- The FCA has said that 596,080 pension plans were accessed for
the first time in 2020-21. HMRC data shows that 8,600 people paid
charges under the LTA in 2020-21 (rounded up in the OBR EFO as
above). This means that pensions on which charges were levied
constituted c. 1% in 2020-21. https://www.fca.org.uk/data/retirement-income-market-data-2020-21
- The EFO also notes that the changes will bring only 15,000
additional people back into work at the forecast horizon. In the
final year of the forecast the two measures are in total forecast
to cost £1.125bn. This means the cost in that year per person
brought back into work is £75,000.
- The Resolution Foundation calculated that the typical
household faces tax rises of £650 from April. https://www.resolutionfoundation.org/publications/new-budget-same-problems/
- The OBR EFO sets out that real household disposable income
per person has fallen by £1,500 – from £21,900 2019-20 to £20,400
in 2023-24.
- The OBR EFO sets out that the tax burden will reach ‘a
post-war high of 37.7 per cent of GDP at the forecast horizon in
27-28’.
- Someone with a pension pot of £1.4m can take a maximum
tax-free lump sum of £268,275. Before today’s changes, they would
have paid 55% tax on that amount as it was above their lifetime
allowance – amounting to c. £150,000. With the scrapping of the
lifetime allowance they will not have to pay this tax.
