In his article – Boost for middle-class workers as Jeremy Hunt plans to raise pension cap to stop professionals taking early retirement – The newspaper said that Whitehall sources had confirmed that 1 million £ Lifetime Allowance (LTA) would see the first significant rise in a decade.
It added that the £40,000 cap on annual pension contributions will also be raised.
The LTA was initially set at £1.5m when it was introduced on A-Day in 2006. It gradually rose to £1.8m. in 2010, but fell to just £1m. in 2016. Upgrades since then have seen the LTA grow to £1,073m. .
The annual allowance is currently capped at £40,000.
That Daily mail however, the article did not specifically mention the Money Purchase Annual Allowance (MPAA), which is currently set at £4,000 and reduces the amount over-55s can pay into their pension by 90% if they have accessed any of their pension pot for making ends meet during the pandemic or cost of living crisis.
Last week, an industry coalition of around 17 industry companies and organizations sent a letter to HM Treasury calling for swift reform of the MPAA.
The signatories – which include Aegon, AJ Bell, the Association of British Insurers, Hargreaves Lansdown, the Pensions and Lifetime Savings Association (PLSA), Redington and The Investing and Saving Alliance (TISA) – are calling for the MPAA to be raised from £4,000 to £10,000.
It also calls for a long-term review of the MPAA’s effectiveness to examine the effectiveness of the current rule and to discuss possible improvements to its operation and impact.
Royal London pensions and legal expert Clare Moffat said a key focus of the budget must involve dealing with pension longevity and annual allowances.
She said: “The freeze on the former has meant that many more people are affected by how much they can save in a tax-efficient way, but it has been crucially key in the decision-making of many, including doctors in the NHS, to choose to leave their professions and retire rather than pay heavy tax charges.”
Scottish Widows head of policy Pete Glancy also believed the Government should reform tax credits – “seizing the opportunity” to encourage older professionals to return to work.
He said: “The LTA, the annual allowance and the MPAA have all been frozen in monetary terms despite recent inflationary pressures. This means that more and more older skilled professionals that the country desperately needs, such as doctors and those in fields such as for example, advanced manufacturing and biotechnology that face significant and unexpected fiscal penalties just to return to work.
He added: “We want the LTA for defined contribution pensions to be scrapped; the annual allowance to increase at least in line with inflation to help those in defined benefit pensions; and the MPAA to disappear for those who have accessed some of their retirement savings just to make ends meet. This is a crucial time for the economy and existing pension policy is actively holding the country back.”