Average worker takes 400 years to gain from Tory pension bung, Labour finds

Angela Rayner has denounced the Tories’ decision to scrap the lifetime pension allowance as a “£1bn bung to the richest 1%” after analysis revealed that the average worker would have to save for 400 years to benefit from the change.

Jeremy Hunt announced in the Budget in March that the government was axing the lifetime allowance, the cap on the amount workers can accumulate in pensions savings before paying extra tax, previously set at £1.07m.

Labour analysis of Office for National Statistics (ONS) data found that a worker with average earnings would have to save for roughly 400 years to receive any tax savings from the change.

According to the ONS data, released in January 2022, the average person approaching retirement age has approximately £107,000 in their pension fund, one tenth of the amount that they would need to benefit – meaning that they would need to work and save for ten times as long to receive any saving, Labour said.

Commenting on the findings, the deputy Labour leader 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%.

“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% 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.”

Labour has pledged to reverse the decision to abolish the lifetime allowance should it come into power, with Shadow Chancellor Rachel Reeves saying she was “astonished” at the move as it came at the same time working people are facing the the “biggest falls in living standards ever recorded”.

As well as axing the lifetime allowance, Hunt announced that the tax-free yearly allowance for pensions would rise from £40,000 to £60,000. The policies are expected to cost the Treasury more than £1.1bn a year by 2027/28 and are intended to stop high earners, including senior NHS doctors, from leaving the workforce.

Hunt told MPs during his statement that he had “listened to the concerns of many senior NHS clinicians, who say unpredictable pension tax charges are making them leave the NHS just when they are needed most”.

The Chancellor argued that the “issue goes wider than doctors”, adding: “No one should be pushed out of the workforce for tax reasons.”

Labour leader Keir Starmer condemned the plans as a “huge giveaway to some of the very wealthiest”, declaring: “The only permanent tax cut in the Budget is for the richest 1%. How can that possibly be a priority for this government?”

Responding to Labour’s criticism of the move, Chief Secretary to the Treasury John Glen claimed that the opposition had pledged to abolish the lifetime pension cap “just a few months ago”.

He said: “The Conservative government wants to keep more of our most experienced doctors and consultants on the frontline of our NHS to cut waiting lists – Labour need to explain to the British people why they now disagree.”

In response to earlier claims by ministers about Labour’s position, Shadow Health Secretary Wes Streeting stressed that the opposition had called for the change to apply to doctors’ pensions only, in order to address retention issues.

Starmer has argued that introducing a “tailor-made approach” for doctors would be “very easy”, noting that such a scheme was recently set up for judges.