Jeremy Hunt is reportedly considering increasing the tax-free allowance for pensions by more than £500,000 to prevent professionals from retiring early.
The Chancellor is said to be looking at increasing the lifetime pension allowance (LTA) to reverse the trend of early retirements and bolster Britain’s workforce as part of his Budget package.
The lifetime allowance currently stands at £1.07 million, meaning that those with more in their personal pension pot incur tax after that threshold has been reached.
Reports differ on how much Mr Hunt could increase the LTA by, with The Times suggesting a hike to £1.8 million and The Daily Telegraph speculating a figure of more than £1.5 million.
It is also understood that the Budget could see the annual allowance rate for pensions increased, with Mr Hunt having tasked his advisers with calculating how much a change would cost the Exchequer.
The Telegraph and The Times believe the amount each person can save each year before incurring tax is likely to rise from £40,000 to £60,000.
In his Bloomberg speech earlier this year, Mr Hunt vowed to consider fiscal measures that would help the over-50s who had taken early retirement during or after Covid-19 to return to work.
The British Medical Association (BMA) has called the current LTA rate “punitive” and argued that it has encouraged doctors to leave the profession.
The BMA has said that “significant pay erosion” and a “punitive pension taxation system” have resulted in “large numbers of doctors retiring early or reducing their hours.”
Former pensions minister Baroness Altmann has lobbied ministers to change “illogical” pension rules to help ease a workforce crisis in the NHS.
During a House of Lords debate, the Conservative peer said “even middle earners” were finding that their “supposedly tax-free pension contributions” were “causing them to receive huge tax demands that can even exceed the extra earnings.” The Treasury has declined to comment on Budget speculation.