Vanessa Ong
"I do not want any doctor to retire early because of the way pension taxes work," he said.
Tom Selby, head of retirement policy at AJ Bell, said: “Jeremy Hunt has unveiled a pensions tax-cutting bonanza far beyond anyone’s pre-Budget expectations and the most significant retirement policy intervention since the 2015 ‘pension freedoms’.
“The lifetime allowance has long acted as a drag anchor on strong investment performance and a deterrent to retirement saving, while also creating horrendous complexity in the system. It has also added to the huge turmoil engulfing the NHS, with senior doctors choosing early retirement over paying a pension tax penalty.
“Significant hikes in the annual allowance, and in particular the money purchase annual allowance, are also welcome and should help reduce disincentives for over 55s to return to the workforce.
“Taken together, these pension tax cutting measures amount to a colossal boost to savers and retirees and send a clear message to hard-working savers that the government is now firmly on your side.”
Susan Bourke, Head of Risk & Health at independent consultancy Broadstone, explains the practical benefits for employers and how it will help the provision of Group Life cover: “The Lifetime Allowance has always been a frustrating complication for employers due to the HMRC registration process and the link to pensions legislation, which has never made very much sense to our industry.
Its removal reduces many of the complications that employers have had to navigate and tough decisions they have had to make when placing cover for higher earners or for those that have historic defined benefit pensions.
"Balancing the added complexity of implementing Excepted Group Life arrangements that come with their own taxation implications with the risk of a higher lump sum benefit on death through a Registered scheme has always been a headache."
Monica Ma, pensions solicitor at Keystone Law said while the abolition of the lifetime allowance could attract some early retirees back into the workforce, but it is "hard to gauge as the pension cap is only one of many factors which cause people to leave the workforce" .
“Many employers in the private sector have been dealing with the lifetime allowance issue by offering their senior, high-earning employees cash payments instead of pension contributions," she said.
"These arrangements will now need to be reviewed as it may be in the interest of both the employer and the employees to revert to tax-advantaged pension contributions.”
In other budget news:
- The Chancellor said the country is expected to avoid a technical recession this year and inflation is on track to be more than halved.
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Chancellor Jeremy Hunt has announced a £4 billion expansion of free childcare to parents of all under fives in his first budget.
- The government will keep its cap on energy prices for a further three months. It had been expected to rise to £3,000 next month, meaning another hike in household bills.
- Hunt says he is introducing a new tax credit for small and medium sized firms that spend 40% of their expenditure on Research & Development.
- Hunt has unveiled "Universal Support" to help disabled people in England and Wales find jobs
- Tax reliefs for film, TV and video gaming are also being extended.
