Increasing the allowance in Wednesday's Budget means workers could avoid paying more on their pension.
The lifetime allowance is the total amount of money you can build up in a workplace defined benefit pension scheme and savings in a defined contribution pension before you face a further tax charge. The tax is levied on the excess over the allowance. The state pension is not included in the calculation.
The charge comes at certain times, such as when you start to draw a defined benefit pension. The allowance had been scheduled to remain at £1.07m until 2025-26. It has been seen as a particular issue in the medical profession, leading to some doctors and consultants reducing their hours or retiring early from the NHS because they were in danger of breaching the allowance. They calculated that continuing to work was counterproductive for their finances.
The annual allowance is the amount you can build up each year, before facing a tax charge, and has been subject to much of the same debate.UK economic growth has flatlined in recent months and the Bank of England expects the UK to enter a recession this year. Many industries have struggled to recruit workers, though job vacancies are falling.show that although job vacancies fell for an eighth consecutive month, the number of vacancies remains high at 1.1 million.
The government has been considering plans to coax retired middle-aged workers back into jobs to try to boost the economy, with reports older workers could be offeredEarlier this year, Mr Hunt pledged to consider changes to encourage the over-50s who had taken early retirement during or after Covid to return to work, saying he "would look at the conditions necessary to make work worth your while".
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