Plans to abolish the lifetime allowance (LTA) have been branded a “£1bn bung”, after analysis from Labour suggested that working people with average earnings would have to work for 400 years before they would benefit from the tax cut.

The analysis, based on data from the Office for National Statistics, showed that the average person approaching retirement age has an average of £107,000 in their pension funds, 1/10th of the amount they would need to have to benefit from the changes in the Budget.

Based on this, those on average earnings would have to continue working and saving for ten times as long as they had before they would see a tax saving, roughly 400 years in total.

Following the latest analysis, Labour reiterated its call for the government to not go forward with the tax cut and instead introduce specific measures to keep doctors in work, after previously committing to reverse the changes if elected at the next election.

Commenting on the analysis, Labour 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 £1bn 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."

However, industry concerns have emerged around the idea that the LTA changes could become a key battleground ahead of next year’s election, with Barnett Waddingham associate, Phil Duly, warning that this is a "short-sighted" approach.

"In reality, we must focus more broadly on how to solve the pensions system's many inequalities, and there is much work to be done," he continued. "This includes improvements to automatic enrolment, the state pension system, and the gender pensions gap. All of these would help the 'average worker'.

"If the battle on LTA must be fought, the best solution is a significant increase to the LTA, to maintain a ceiling required for tax-free cash.

"In addition, a removal of the money purchase annual allowance (MPAA) to benefit those needing to dip into savings in the current cost of living climate would help to eliminate complexity.”

Share Story: