Pension help for middle-class workers as Hunt ‘plans to raise cap in budget’

theguardian.com:

Jeremy Hunt is reportedly planning to give middle-class professionals a pensions boost in next week’s budget to encourage them to continue working.

The chancellor will announce significant increases to pensions allowances in a bid to tackle the “pension trap”, which has seen many workers take an early retirement, according to the Daily Mail.

The lifetime allowance (LTA) on tax-free pension savings will rise, as well as the £40,000 cap on annual pension contributions, the Daily Mail reported, citing Whitehall sources. The Treasury declined to comment.

The reported increase, which could be revealed in the budget on 15 March, is intended to end the pension trap that can leave some professionals – such as doctors – facing higher tax charges if they stay in the workforce.

It has prompted many to consider early retirement or reducing their hours to avoid paying more tax on their pensions.

The British Medical Association had previously warned that the way taxation policy and the NHS pension scheme interacted had created a “perfect storm”, where “the most sensible course of action for many to not lose out financially is to reduce their work or even cease working the NHS altogether”.

Some doctors and other workers stopped doing additional shifts or left the NHS because they were worried their extra earnings would increase their pension pot by more than the maximum allowance, triggering an extra tax charge.

Jason Hollands, the managing director at the wealth manager Evelyn Partners, said the reports ahead of Hunt’s first budget were “welcome news”.

“[The caps have] created a disincentive for continued pension saving among higher-earning professionals and is a factor driving early retirement decisions at a time when the economy faces the