LONDON — Contentious new pension measures in Jeremy Hunt’s budget — aimed at keeping senior doctors in work — have been described as a “huge giveaway” to the rich by the opposition Labour Party.
In his spring budget announcement Wednesday, the U.K. chancellor said he was scrapping the pension “lifetime allowance” — the maximum amount it is possible to save in a pension pot before paying additional tax.
Hunt framed the measure as a way keeping of keeping people in the U.K. workforce, particularly long-serving doctors who have warned they are paring back hours or retiring early to avoid being clobbered by the tax.
But critics say Hunt’s move will be costly and are already questioning the difference it will make in keeping people in the labor market.
“The announcement today is a huge giveaway to some of the very wealthiest,” Labour leader Keir Starmer told the House of Commons.
The soon-to-be-abolished lifetime allowance was set at £1.07 million, meaning the effective tax cut will benefit those with more than that amount in pension savings. According to the Treasury, in 2020-2021, nearly 9,000 people were paying these lifetime allowance charges. The opposition argued in a post-budget briefing that a high earner with a £2 million pension pot will get an effective tax cut of £275,000 under the new measures.
“Most [of those who would benefit from its abolishing] are doctors,” James Kirkup of the Social Market Foundation think tank said in his own analysis. “Abolishing LTA may well help NHS staffing, but it’s also a huge giveaway to a very small group of very wealthy people.”
Torsten Bell, a former Labour adviser who now heads up the Resolution Foundation think tank, branded it a “bad idea” and warned: “There are cheaper ways to keep some doctors in work.”
But doctors’ reps at the British Medical Association welcomed Hunt’s pension reforms as a way of tackling staffing shortages.
“Levies applied to pension contributions have in recent years seen increasing numbers of consultants and other senior doctors forced to reduce their working hours or take early retirement in order to avoid being charged for working, at a time when the NHS staffing shortage is at crisis level,” the group said in a statement.
According to the Treasury’s own costing figures, the measure will come with a price tag of £835 million a year by 2027-2028. Fiscal watchdog the Office for Budget Responsibility said it amounted to the “largest single cost” in the budget.
In their accompanying briefing document, the OBR said the measure would increase employment by around 15,000 — “by removing some financial disincentives to continuing in employment for those with large pension pots.”
The NHS has had particular issues with attaining and retaining staff in recent years. September 2022 statistics found that the health service had 133,446 vacancies, a vacancy rate of 9.7 percent.