In the 2023 Budget, then-chancellor Jeremy Hunt announced the end of the LTA from April 2024. Labour immediately pledged to reintroduce it but shelved that plan when it became clear senior doctors and other public sector workers would be likely to leave the workforce as a result.
Three new pension allowances replaced the LTA when it was abolished. If Labour retains them, the maximum tax-free lump sum will be frozen at 25pc of your pension, or a maximum cash value of £268,275.
Now that there is no overall cap on how much you can save into a pension, only income tax is due beyond that. The same applies to pots you leave behind when you die and certain overseas transfers.
If Labour were to change their minds again and bring the charge back, it could affect up to 6pc of savers approaching retirement, or around 250,000 people, according to consultancy LCP.
Experts agree that any changes would take time to implement and would be unlikely to apply retrospectively to any actions taken now. However, the LTA is not mentioned in Labour’s manifesto and the party could still reintroduce it.
HMRC has already confirmed the LTA’s removal is not complete, with the legislation including a so-called “Henry VIII clause” that means it can be changed at a later date.
Until it is, some richer pension savers have been advised not to access their retirement benefits.
Could Labour take aim at pensions tax relief?
Pension savers currently receive tax relief on contributions at their marginal or highest rate of income tax. This gives everyone 20pc in relief, but higher rate taxpayers get 40pc and additional rate payers are entitled to 45pc.
In 2016, then-backbencher Rachel Reeves, now Chancellor, penned a column for The Times arguing for a 33pc flat rate of tax relief. According to the latest HMRC figures, around 6.5 million people could lose out under such a system.
Labour has been forced to deny this is policy and it is no longer understood to be Ms Reeves’ view. However, the party has not definitively ruled it out and if it were introduced, it could hit some high earners with six-figure losses over a 30-year career.
According to Hargreaves Lansdown, a worker earning £100,000 and contributing 10pc of their salary into a pension would lose £700 a year. For someone earning £200,000, this rises to £2,400, while someone on £300,000 would lose £3,600.
