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Labour would reverse abolition of pensions Lifetime Allowance for targeted approach

Labour would reverse abolition of pensions Lifetime Allowance for targeted approach

Labour has said it would reverse plans to abolish the pensions Lifetime Allowance if they were voted into Government because it amounted to a ‘Tory tax cut for the rich’.

Shadow chancellor Rachel Reeves confirmed they would reverse the move and said it was the ‘wrong priority’ during a cost of living crisis. Ms Reeves added she would push for a vote against the measure next week.

A spokesperson for the party told Pulse that the plans were a ‘£1 billion sledgehammer to crack a nut’.

In a row on Twitter, health minister Maria Caulfield called it ‘another Labour U-turn’, because the party had previously announced it wanted to lift the pensions cap.

But shadow health minister Wes Streeting replied they had called for a targeted solution to fix pensions disincentives for doctors which would be a fraction of the cost.

In his Spring Budget yesterday, chancellor Jeremy Hunt announced the abolition of the pensions Lifetime Allowance in a bid to retain GPs and other doctors.

Under the changes:

  • The Lifetime Allowance charge will be removed before being abolished altogether, ‘removing barriers to remaining in work and simplifying the tax system by taking thousands out of the complexity of pension tax.’
  • The Annual Allowance will be increased from £40,000 to £60,000, in order to ‘incentivise highly-skilled workers to remain in the labour market.’

Mr Hunt said it would mean an estimated 80% of NHS doctors will not receive a tax charge with respect to accruals under the 2015 NHS career average scheme.

A spokesperson for Labour said: ‘The British Medical Association provided evidence to the Health Select Committee which suggested that it could cost as little as £32m to fix pensions disincentives for doctors-only, just as there is a targeted scheme for judges.

‘Labour has been calling on the Government to fix this issue for months, but the way the Conservatives will cost £1bn and give a tax cut to thousands of the richest people in Britain who aren’t doctors, which we think is a poor use of taxpayers’ money. It’s a £1bn sledgehammer to crack a nut.’

Interviewed on ITV’s Peston last night, Mr Hunt defended his decision to offer a tax break for the rich.

He said: ‘Doctors are my priority… I want older people to stay working if they want to. 150,000 people retire early every year. They have a contribution to make. And by definition older people tend to be on slightly higher salaries.’

He said the ‘priority’ in the budget were ‘young families’ who would get a ‘60% reduction in the cost of childcare’.

But he added: ‘If you’re saying to me, do I want more doctors to be working in our NHS. Absolutely, you bet I do.’

Announcing the plans in the House of Commons on Wednesday, Mr Hunt said: ‘I have listened to the concerns of many senior NHS clinicians who say unpredictable pension tax changes are making them leave the NHS just when they are needed the most.

‘The NHS is our biggest employer and we will shortly publish a long-term workforce plan that I promised in the autumn statement – but ahead of that I don’t want any doctor to retire early because of the way pension taxes work.

‘No one should be pushed out of the workforce for tax reasons. I will go forward an abolish the lifetime allowance, it is a pension tax reform that will stop over 80 per cent of NHS doctors from receiving a tax charge.’

The chair of the BMA pensions committee, Dr Vishal Sharma, said that scrapping of the lifetime allowance will be ‘potentially transformative’ for the NHS, as senior doctors will no longer be forced to retire early and can continue to work. 



Please note, only GPs are permitted to add comments to articles

Peter McEvedy 16 March, 2023 12:40 pm

I think Labour are quite right – maybe increase the amount by inflation or even back to the £1.8 million but this really is only going to really help the ultra rich rather than doctors. I did hit my limit although had protected it at above the present level but if I were spending money now, I can think of more deserving people – junior doctors for instance.

Dave Haddock 16 March, 2023 7:50 pm

Odd that if Labour thought that this tax made sense that they did not introduce it when last in Government.
Even odder is that Wes Streeting called for it’s abolition a few months back.

Truth Finder 17 March, 2023 10:46 am

The Reform party looks good.

Nathaniel Dixon 17 March, 2023 4:34 pm

If labour have a “cunning plan” of a targeted approach, I’m all ears lets here how they’d do it. Otherwise I’m inclined to believe it’s fantasy politics. Labour’s current actions are just going to encourage anyone near retirement to go before they get to power (likely the next election).

Andrew Hill 17 March, 2023 5:10 pm

Whether you agree with or are affected by the policy or not, how can anyone (not just doctors) make purposeful pension planning with the constant meddling of the pension rules but successive governments. I agree with Nathaniel Dixon that the labour position is likely to provide a “window of opportunity” between the policy coming in and then labour reversing it when GPs and consultants may hang up their boots to make the most of the allowance abolition.

Dave Haddock 17 March, 2023 6:36 pm

Wes Streeting, Torygraph last September
“I’m not pretending that doing away with the cap is a particularly progressive move […] But it is one that sees patients seen faster, and will inevitably save lives. I’m just being hard headed and pragmatic about this.”
Labour appear to be very confused on this.

John Evans 17 March, 2023 6:42 pm

Tax relief going in was less than the extra tax when collecting the pension.
GPs with profits of £170 would pay 30k employer contributions and 20k personal contribution.
The remaining amount taxed at 38%.
Annual pension tax for a GP with long service history could have been another 10%..

A tax rate of 50% and expectation of being landed with a LTA charge when claiming is not in the spirit of being a gradually progressive.

Would it be too cynical to wonder if the sledgehammer was used because a large number of politicians are going to be thrown out in 2024/5 and since the politicians have awarded themselves a 30% pay rise over the past decade, and have a far more generous pension accrual, many of them would breach the LTA.

Don’t leave it to crystallise if you are in the zone.