Workers with average earnings would have to save for 400 years to benefit from Jeremy Hunt’s tax cut for people with pension pots worth more than £1 million, Labour has said.
The Chancellor used his spring Budget to abolish the tax-free limit on pensions savings, which had stood at £1.07 million.
The average 55 to 64-year-old approaching retirement age has an average of £107,300 in their pension pot – just a tenth of the amount needed to take advantage of the change, according to Labour analysis of Office for National Statistics (ONS) data.
£2.75 billion cost
They would have to keep working and adding to their pension for 10 times longer – amounting to about four centuries – to see a tax saving.
The Government has insisted the tax cut, which will cost £2.75 billion over the next five years, will encourage senior doctors, teachers and police officers to stay in work.
The Office for Budget Responsibility has estimated it could boost the workforce by 15,000 as people who might otherwise have retired to avoid breaching the lifetime allowance decide to keep working instead.
Prime Minister Rishi Sunak has argued it will get doctors to take on more hours and reduce NHS waiting lists, but could not say how many will stay in work because of it.
“Won’t play a big part”
But Paul Johnson, director of the Institute for Fiscal Studies think tank, has said the change “won’t play a big part, if any, in increasing the number of people in work”.
Labour has criticised it as a giveaway to the wealthiest 1 per cent of pension savers, arguing a bespoke scheme for doctors to tackle retention issues in the health service would be fairer.
The party has pledged to reverse Mr Hunt’s policy if it wins the next general election.
Deputy leader Angela Rayner said: “Someone starting out their career today would have to work until the year 2423 before they’d see a penny from the Tories’ tax giveaway to the top 1 per cent.
“At a time when families across the country face rising bills, higher taxes and frozen wages, this is the wrong priority at the wrong time.
“This May, voters face a choice: a choice between a Tory Government that has left people out of pocket during a cost-of-living crisis and prioritised giving a £1 billion bung to the richest 1 per cent, or a Labour government that would put working people first.
“That is what Labour will always do. Right now, a Labour government would freeze council tax this year, funded by a proper windfall tax on oil and gas giants to help ease the cost-of-living crisis facing so many.”
Living costs
Labour has turned its focus to living costs in its campaign for England’s May 4 local elections, in which it is hoping to snap up votes as the Tories continue to lag far behind in national polls.
A Government spokesperson said: “With too many people on NHS waiting lists, we need to move quickly – that’s why we have implemented pension reforms to help keep experienced doctors and consultants in our NHS.”
Conservative Party chairman Greg Hands said: “Labour’s approach puts doctors into retirement, ours puts doctors back on wards cutting waiting lists.
“Starmer has a bespoke, tax-unregistered pension that only benefits him, but now opposes changing a system that will help the NHS cut waiting lists.
“Whilst Labour continue to play politics, we will continue delivering on our pledges to halve inflation, grow the economy, reduce debt, cut waiting lists and stop the boats.”
Labour has defended Sir Keir against the criticism, saying he did not set the pension rules while he was head of the Crown Prosecution Service.
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