Labour drop pledge to bring back lifetime allowance

10 June 2024

Written by Retirement Line Updated: 10th June 2024

It is being reported that the Labour Party is no longer committed to reintroducing the pensions lifetime allowance (LTA).

This £1,073,100 cap on how much an individual can accumulate in pension savings was abolished by the government in April. Initially Labour criticised the move and looked set to reintroduce the LTA if elected, but a policy U-turn has emerged.

Among the financial media reporting the change in policy on 10 June were This is Money,  FT Adviser, Professional Pensions and International Adviser.

Commentary on the decision from pensions industry figures has been positive:

“The LTA had perverse consequences for public sector professionals with generous defined benefit schemes, including fuelling early retirement by doctors and deterring medical consultants from taking on extra surgical work. Reintroducing it, other than at a very high level, would have jeopardised the need to clear NHS backlogs.”
Jason Hollands, managing director at Evelyn Partners, quoted in International Adviser.

“The decision to scrap the pensions lifetime allowance for good in April this year was both necessary and sensible. Labour therefore deserves credit for recognising this and dropping plans to reintroduce the limit… Labour’s commitment to stability should give savers confidence to plan for the future.”
Tom Selby, director of public policy at AJ Bell, quoted in International Adviser.

“In order for advisers to do good financial planning, they need clear, consistent policy that supports long-term strategies. That’s what this decision delivers, and why it is so welcome. It is particularly good news for experienced public sector professionals, such as medics and headteachers, who have been facing years of punitive pension tax issues because of the LTA.” 
Nick Henshaw, head of intermediary distribution at Wesleyan, quoted in FT Adviser

Comment from Retirement Line’s Mark Ormston

Retirement Line’s Mark Ormston was also quoted on the subject in the FT Adviser article. His view is that the U-turn may in part be fuelled by ‘basic electioneering’. 

He said: “One of the Conservatives’ main messages is to ‘attack’ Labour on increasing taxes and a key driver for the LTA being scrapped was NHS employee retention. 

“No matter what the polls are suggesting, Labour will not want to allow their political opponents the opportunity to present the image that ‘Labour will tax your private pension and worsen the employment crisis within the NHS’ (I am no spin doctor, but you get the idea).

“Secondly, in an ideal world, Labour (or any political party) will want to bring industry along with any changes they may be considering. Typically, this involves numerous consultations and listening exercises before any changes are introduced.”

The Labour manifesto is due to be published this Thursday (13 June).