The Labour Party will reportedly not include its pledge to reinstate the lifetime allowance in its manifesto, set to be published on Thursday.
According to FT Adviser’s sister publication, the Financial Times, Labour has dropped the proposal because it would add uncertainty and be complex to reintroduce.
Shadow chancellor Rachel Reeves had previously said a Labour government would reintroduce the pensions lifetime allowance, which was abolished by chancellor Jeremy Hunt earlier this year.
The lifetime allowance was a limit on the total value an individual’s private pensions could reach before tax rates were applied. When it was abolished the LTA stood at £1,073,000.
No plans had been outlined as to how the reintroduction would happen, though a carve out for groups such as NHS doctors had been discussed.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “First it was in, then it was out, then it was back in again – sort of. The game of lifetime allowance hokey cokey looks to have finally drawn to a close, with briefing that Labour will drop plans to reintroduce the controversial tax.
“The news will be greeted with a sigh of relief by people who can now plan ahead for their futures with more certainty.
“There were still tweaks to the rules in legislation needed to finalise the removal of the LTA when the election was called. It will be a relief to those planning their retirement that Labour have committed to finish the job.”
She added: “The lifetime allowance affects more than just ultra-high net worth people. It could be an issue for many who have saved diligently for their future.
“Any reform of the pension tax system should be done with the aim that people are properly incentivised to save for their futures without having to worry about being tripped up by complex rules. Pensions planning is a long-term business, creating consensus around the rules is essential.”
Nathan Bridgeman, director at SeaBridge Ssas said it was welcome news for pension savers and those in the pensions profession.
“I still fear a Labour government destabilising pensions by reducing the annual allowance or reducing tax relief on contributions or the favourable IHT status that makes them such an attractive tax wrapper,” he added.
“We need stability in pensions and for politics to be taken out of pension policy. No more tinkering and shifting sands so the professionals and their clients can make long term plans.”
Last week, the Institute for Fiscal Studies said reintroducing a reformed LTA would be "sensible" and it et out several options for how this could happen.
The first would be to simply reinstate it at its previous level, but this would raise several questions, it stated.
