Rumours swirl over UK chancellor Hunt's Budget plans for pension taxation

It would be odd for there not to be rumours swirling around changes to pension taxation in the days leading up to a Budget, says Jon Greer, head of retirement policy at Quilter.

According to a report in the Daily Mail on 10 March, UK Chancellor Jeremy Hunt will use the Budget next Wednesday to unveil significant increases in pension allowances as part of a move to encourage people to work longer.

However, he commented that "if these moves are designed to get people to go back to work or continuing to work longer, they may have the opposite impact. In fact, it would arguably allow some to retire earlier if they can put more in".

With an election around 18 months away this move could be seen as an attempt to shore up support with core voters after a string of issues in government stretching back as far as 2020, he said.

"If these rumours come to fruition, it will be welcome news to higher and additional rate taxpayers who, on the face of it, would be able to put more money into pensions and receive marginal relief.

"Equally for those accessing their pension, an increase in the lifetime allowance will be welcome as that allowance has been eroded significantly down over time to £1m since 2016 with little movement since, meaning more and more people are caught by this tax rule that was only designed to impact a small minority."

However, he further said the LTA is a growing issue for a material cohort of the public sector: "While the annual allowance can be an issue for people in defined contribution schemes as well as those in DB schemes, its impact on the NHS and doctors has been well reported and needs to be addressed but many will be surprised at this remedy.

"Therefore, while these changes may be wrapped up in an attempt to get over 50s back to work they look like they are mainly aimed at fixing the problem of NHS senior healthcare workers leaving the profession in their droves as a result of punitive pension taxation that make it expensive to take on additional hours or more logical to leave work entirely.

"Just at a point when the pressures on the NHS are mounting we cannot afford to see these key people being incentivised to leave the profession."