People in work will be able to save more money for retirement tax-free, the Government has announced.

In his first spring Budget as Chancellor, Jeremy Hunt launched a number of policies to boost the economy and keep people in their jobs.

Mr Hunt said he had listened to the concerns of senior NHS doctors who were leaving the profession due to the punitive pension tax system when devising his reforms.

What did the Chancellor say about pensions?

Mr Hunt has abolished the lifetime pension allowance (LTA) – the total people can save in their pension pot before being taxed – in a bid to encourage older workers to stay in the jobs market.

The lifetime allowance stands at £1.07m, with savers facing tax after reaching that threshold.

On Wednesday Mr Hunt announced the threshold would be scrapped entirely. It was expected that he would increase it.

First applied in 2006, the LTA was set at £1.5m. By 2012, it rose to £1.8m before gradually being cut.

Mr Hunt announced changes to the the annual allowance rate for pensions, increasing the amount each person can save annually before being taxed from £40,000 to £60,000.

The changes are likely to encourage doctors to stay in work. The British Medical Association previously called the current LTA rate “punitive” for the workforce.

Alice Guy, head of pensions and savings at Interactive Investor, said the rate had been “incompatible with the Government’s aim to support older workers” by catching out doctors, senior teachers and civil servants.

She said it had a “chilling effect on pension saving” and that a more generous system was needed.

Mr Hunt told the House of Commons that he did not want doctors to retire early because of the way pension taxes work. His reform, he said, would stop more than 80 per cent of NHS doctors from receiving a tax charge.

The pension pot problem has been one of the factors blamed for senior doctors leaving the NHS, or declining to come back.

What about the state pension age?

Before the Budget there had been rumours the Chancellor could announce an acceleration of the state pension age increase to 68.

After the state pension age for women moved from 60 to 65, in line with men, it has since increased to 66 for both sexes. By 2028, it is due to rise again to 67 with a further increase to 68 by 2046.

The Government had proposed bringing the move forward to between 2037 and 2039 amid concerns about the affordability of the state pension for an ageing population.

However no changes to the state pension age were announced in the Budget statement.

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