UK abolishes tax threshold on pension allowance to encourage people to work longer
LONDON (Reuters) - British finance minister Jeremy Hunt on Wednesday said he would abolish the tax thresholds high earners face when they invest in pensions, in a bid to encourage them to keep working and reduce the number of people taking early retirement.
Hunt said in his annual budget that he would scrap the so-called lifetime allowance, which had meant that people faced a 25% levy if they saved around 1.1 million pounds ($1.33 million)in their pension pots.
The capped amount of money that can put in their pensions in one year without paying tax will also rise to 60,000 pounds from 40,000 pounds, he said.
The move is designed to stop people, particularly doctors and other professionals, quitting the workforce or reducing the hours they work when their pensions surpass the tax thresholds.
"I do not want any doctor to retire early because of the way pension taxes work," Hunt said.
Hunt has said he wants to increase the size of the labour force which has shrunk after the COVID-19 pandemic and, unlike other countries, has yet to return to its pre-coronavirus level.
($1 = 0.8279 pounds)
(Reporting by Andrew MacAskill; editing by William James)