Barnett Waddingham's Phil Duly says that, while Jeremy Hunt's decision to abolish LTA may not help many, it should not become a major election issue. Picture by Rory Arnold / No 10 Downing Street
The Labour Party’s denouncement of the government’s plan to scrap the lifetime pension allowance as a “£1bn bung to the richest 1%” is short-sighted, Barnett Waddingham says.
The consultancy said Labour was making the move an "election battleground" - pointing towards the political party's analysis that the average worker would have to save for 400 years to benefit from the change.
This comes after chancellor Jeremy Hunt announced the government would scrap the lifetime allowance (LTA) as part of the 2023 Spring Budget in March.
Barnett Waddingham associate Phil Duly said the government's proposed removal of the lifetime allowance was a blunt tool to encourage specific groups with defined benefit public sector pensions, such as doctors and consultants, to remain economically active.
He said the proposal technically gives equal access to everyone to build up high value pension savings, but said it was true that very few have the high earnings required to take advantage of it.
Despite this, he said the opposition's decision to make this a key election issue was not a positive move.
Duly said: "The Labour Party has chosen this as a battle ground ahead of next year's election. This is short-sighted. 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. This includes improvements to auto-enrolment, the state pension system, and the gender pensions gap. All of these would help the average worker."
He added: "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."
