Boost for middle-class workers as Jeremy Hunt plans to raise the pension cap trends now
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Jeremy Hunt will hand middle-class workers a pension boost next week in a bid to encourage them to extend their careers into later life.
Whitehall sources said the Chancellor will use the Budget to unveil 'significant' increases in pension allowances that are blamed for driving doctors and other professionals out of the workforce.
The £1million lifetime allowance on tax-free pension savings will see the first substantial increase for a decade.
The £40,000 cap on annual pension contributions will also be raised. Both moves are designed to tackle the so-called 'pension trap' which can leave some professionals facing punitive tax charges if they continue working into later life.
It is said to have led thousands of doctors to quit and is seen as a major barrier to encouraging them back. When the Government anno-unced a six-year freeze in the annual allowance in 2020, the British Medical Association said it would 'push doctors out of the NHS'.
Whitehall sources said the Chancellor will use the Budget to unveil 'significant' increases in pension allowances
Helen Morrissey, retirement analyst at Hargreaves Lansdowne, said raising the allowances was particularly helpful to those with final salary pension schemes.
But she warned against 'tinkering around the edges', saying a full review of the pension system was needed to remove disincentives to work, such as a £4,000 cap on pension contributions for people who go back to work after starting to draw down their pension.
'The lifetime allowance is not a rich person's issue any more,' she said. 'Because of the way it has been reduced
