The Labor Party is rumored to have backtracked on plans to reinstate the lifetime pension subsidy, which would be a boost for 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 Racheel Reeves has removed the proposal from Labour’s manifesto due to be released this week, according to the Financial Times.
U-turn: Shadow chancellor Rachel Reeves reportedly will not bring back lifetime allowance
Labor had previously said it was the “wrong priority”, but party sources told the Financial Times that reinstating the subsidy would be complex and add uncertainty.
We explain the details of the controversy over the lifetime allowance in our guide on what the election could mean for your pension.
Jason Hollands, managing director of wealth management firm Evelyn Partners, said: “Labour’s plans to reinstate the lifetime pension subsidy arose from a somewhat knee-jerk reaction to Chancellor Jeremy Hunt’s surprise announcement that the LTA would be scrapped from its 2023 budget.
“If the reintroduction of an LTA is not included in Thursday’s Labor manifesto, it will be good news, as the prospect of even more tangled legislation to resurrect this punitive tax penalty on large pension funds and public sector pensions ‘has caused considerable uncertainty over the last year for those deliberating whether or not to increase their savings.’
Chancellor Jeremy Hunt removed the cap on tax-free pension savings from April 2023, but the annual allowance remains in place. This is the amount you can put into your pension each year and qualify for tax relief on what you saved.
It was increased from £40,000 in April 2023 and is currently £60,000, or up to 100 per cent of your annual income if less.
The system was largely revised to appease senior doctors, who were being penalized due to extra shifts and overtime, and were often hit with large and unexpected charges for exceeding the subsidy.
Tom Selby, director of public policy at AJ Bell, said: “Labour’s commitment to stability should give savers confidence to plan for the future.”
‘This measure also supports wider efforts to boost investment, including in UK businesses.
“Any pension tax reform brought forward by the next government should focus squarely on simplification and encouraging more people to save long-term.”
Labor and the Conservatives have vowed to maintain the “triple lock” on state pensions throughout the next parliament.
The triple lock means the state pension is set at the highest inflation, average earnings growth or 2.5 per cent.
Pensioners recently received 8.5 per cent of their state pension in April, raising the headline rate to £221.20 a week or £11,500 a year.
