Labour’s plans to reinstate the pensions lifetime allowance (LTA) if elected at the General Election may be difficult to bring about.
The allowance was scrapped at the start of this tax year after the policy change was announced in Spring Budget of 2023.
David Piltz, CEO of benefits and HR consulting division in the UK at insurance firm Gallagher, told Express.co.uk: “This pledge seems to have been weakened over time and we do not expect material change if they win the Election.
“We have significant doubts as to whether reinstating the lifetime allowance back can be achieved in practice without introducing even more complexity and causing disruption across many industries, including the NHS, as people rush to retire before any change.
“The reinstatement process will be anything but simple and requires strategic foresight. It isn’t just a matter of flipping a switch back to previous legislation.
“The Government will need to carefully consider transitional arrangements, taking into account the time to yet again rewrite legislation, and taking account that pension schemes are long-term vehicles.”
He said there would also need to be more detail about what protections would be in place, while changing up the system again would be “expensive and confusing” for individuals affected by the change.
The expert said tax on pensions may be an “easy political target” but the Government should avoid regular changes to the regime.
Mr Piltz said any changes to tax policy are usually set out in one of a Budget but it is impossible to know when they will be announced.
Looking at how the pensions LTA could be bought back in, he said: “An incoming government could implement transitional arrangements quickly to block individuals attempting to avoid prospective changes.
“This lack of warning would make it very difficult for schemes and individuals to plan ahead. In any instance, we would hope that any new Government would take the time to understand the sector-specific issues before rolling out any drastic changes.
“Pensions tax is complicated; the slightest alteration can influence a workforce’s behaviour. As we know, the previous LTA regime was credited with causing many doctors to retire early or refuse to work extra hours.
“A change in pensions tax policy can be something of a double-edged sword. In reality, the resulting behavioural changes in the workforce can mean that the actual savings to the public purse are not as lucrative as they may first appear.
“Finally, we must not forget the annual allowance. This is easy to change and increased only recently. It will be up to the incoming policymakers to decide whether it could be now be reduced.”
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