Labour has pledged to reverse the abolition of the lifetime pension allowance announced in Wednesday’s spring statement if the party wins power at the next election, saying it is the “wrong priority”.
Scrapping the limit on pensions savings for the wealthiest was included in a series of measures that Chancellor Jeremy Hunt promised would “transform the economy” by boosting the labour force and increasing investment.
In addition to a string of policies aimed at getting people back into the workforce, the Chancellor increased the pensions annual tax-free allowance by 50 per cent from £40,000 to £60,000 and got rid of the lifetime cap, which set a limit of £1.07 million, completely.
There was controversy over the tax break, which aims to discourage an estimated 15,000 high earners from leaving the workforce early.
The measure is primarily aimed at NHS consultants who have been leaving the health service because they say the pension rules mean it is not worth them carrying on.
It was welcomed by Dr Vishal Sharma, a cardiologist and British Medical Association (BMA) pensions committee chairman, who said the "decisive action" will make a difference to the number of staff leaving the NHS.
He said: "Over the last sort of 10 or 12 years, the number of hospital consultants that have taken early retirement has tripled, and for GPs it has been nearly four times.
"And we're really heading towards a sort of precipice where huge numbers were going to go unless things changed.
"So it's really welcome that the Chancellor's listened to our concerns and actually taken some decisive action.
But Labour said scrapping the lifetime allowance was the "wrong priority" and it would seek to force a vote on it in the Commons next week. Rachel Reeves, the shadow chancellor, said it was a gilded giveaway and the wrong priority, at the wrong time, for the wrong people
Mr Hunt accused Labour of shifting its position overnight. "We need more nurses and we are recruiting many more nurses into the NHS," he said. "But yes, I think if you talk to anyone in the NHS, they will say doctors leaving the workforce because of pension rules is a big problem.
"It is something, incidentally, that Labour advocated last September.
"[Shadow health secretary] West Streeting said we should get rid of the cap on pensions, the lifetime allowance.
"He seems to have changed his mind overnight on that one. He said it was crazy and it would save lives to get rid of that cap.
"Well, he was right in September when he said that."
However, the policy has faced heavy criticism from other quarters, including the Resolution Foundation (RF) think tank, which said it was "hugely wasteful", costing about £80,000 per job.
Mr Hunt was also forced to defend the speed of the rollout of his budget offer of free child care for working parents with children under the age of five, a policy that will not be fully available until September 2025.
The Chancellor told Sky News: "This is the biggest transformation in child care in my lifetime.
"It is a huge change and we are going to need thousands more nurseries, thousands more schools offering provision they don't currently offer, thousands more childminders.
Shadow chancellor Ms Reeves said the government is "a bit late to the party" when it comes to child care.
“I think a lot of people who, like me, people who've got kids who are already in primary school will be saying, well, you know, it's great that the government have got to this point, but they're a bit late to the party, frankly, because many mums and dads have struggled on their own for the last few years, the last decade, when support for working parents has been taken away.”
