London Daily

Focus on the big picture.
Wednesday, Feb 18, 2026

Budget: Pensions to get boost as tax-free limit to rise

Budget: Pensions to get boost as tax-free limit to rise

The total amount that workers can accumulate in their pension savings before paying extra tax is expected to be increased in Wednesday's Budget.

The final figure has not been confirmed, but people are expected to be able to save up to £1.8m over a lifetime, up from £1.07m currently.

The policy aims to stop people - particularly doctors - from reducing hours or retiring early owing to tax.

Critics say the move will only benefit a small fraction of the workforce.

UK economic growth has flatlined in recent months and the Bank of England expects the UK to enter a recession this year. About a quarter of people of working-age - around 10 million people - do not have jobs.

Persuading workers to work for longer is part of UK plans to boost growth, with Chancellor Jeremy Hunt's Wednesday announcement on tax and spending being dubbed the "Back to work Budget".

Mr Hunt is also expected to detail other measures to increase the workforce on Wednesday including:

* Parents on universal credit to receive childcare funding upfront, instead of having to claim it back.

* An increase in the UK-wide £646-a-month per child cap on support for universal credit claimants

* Fitness-to-work tests for those with medical conditions.

* Raising the amount that someone over 55 who has already accessed their private pension can put into their pension to £10,000 a year from £4,000

Consultancy LCP told the BBC the government's plans to raise pension tax allowances would benefit relatively few workers.

The number of people who have already breached the lifetime limit on pensions before paying tax and those who risk breaching it is 1.3 million, less than 4% per cent of the UK's current workforce, it says.

The lifetime allowance is the total amount of money you can build up in a workplace defined benefit pension scheme and savings in a defined contribution pension before you face a further tax charge. The tax is levied on the excess over the allowance. The state pension is not included in the calculation.

Anyone drawing their pension is still liable to income tax as normal.

Beneficiaries from an increase in the allowance will include those who have worked in the public sector for many years. There has been a particular focus on doctors and consultants - some of whom have retired early or reduced hours for pension tax reasons as the NHS has become increasingly stretched.

Dean Butler, managing director for customers at insurance firm Standard Life, said middle earners had been increasingly affected by the cap.

Any increase in the annual allowance, he said, would be of specific help to those with irregular earnings who were relying on making larger pension contributions later in their careers.

In the medical profession, some doctors and consultants have reduced their hours or retired early from the NHS because they were in danger of breaching the tax-free pensions lifetime allowance, and they calculated that continuing to work was counterproductive for their finances.

The annual tax-free pension allowance - which is also expected to increase from £40,000 to £60,000 each year - has been subject to much of the same debate.

Many industries are struggling to recruit workers, though job vacancies are falling. Earlier this year, Mr Hunt pledged to consider changes to encourage the over-50s who had taken early retirement during or after Covid to return to work, saying he "would look at the conditions necessary to make work worth your while".

Not everyone believes that boosting pension allowances is the best policy to meet this goal.

"High earners with big pension pots do benefit from inappropriately generous tax treatment of pensions, but there are much better ways of restricting this than these crude limits." said Carl Emmerson, from the Institute for Fiscal Studies, a leading independent think tank.

Newsletter

Related Articles

0:00
0:00
Close
Italian Police Arrest Man After Alleged Attempt to Abduct Toddler at Bergamo Supermarket, Child Hospitalised With Fractured Femur
Rupert Lowe wanted to deport rape gangs and the communities who protected them
Reform UK Appoints Former Conservative Minister Robert Jenrick as Finance Chief
UK Unemployment Rises to Highest in Nearly Five Years as Labour Market Weakens
Rupert Lowe Advocates for English-Only Use in the UK
US Successfully Transports Small Nuclear Reactor from California to Utah
South Korea's traditional sand wrestling sport ssireum faces declining interest at home
Japan outlawed Islam
Virginia Giuffre accuses Epstein of trafficking to powerful men for blackmail.
New Mexico lawmakers initiate investigation into Zorro Ranch linked to Jeffrey Epstein
British Tourist Arrested at Hong Kong Airport After Meltdown and Vandalism
The Spanish government has ordered prosecutors to investigate platforms X, Meta and TikTok for allegedly spreading AI-generated child sexual abuse material
European Commission Plans Purchase Incentives Limited to Vehicles Manufactured Largely in the EU
French District of Pas-de-Calais Introduces Immediate License Suspension for Drivers Using Mobile Phones
Volkswagen Targets €60 Billion in Cost Reductions as Sales Decline and Global Pressures Intensify
Nigel Farage Names Reform UK Frontbench Team and Signals Zero Tolerance for Internal Dissent
Qualcomm to Withdraw UK Lawsuit Over Smartphone Chip Royalty Dispute
Major UK Banks Explore Domestic Card Network to Rival Visa and Mastercard
Cold Health Alert Issued Across UK as Temperatures Drop Sharply
Nine-Year-Old Becomes First Child in UK to Undergo Groundbreaking Leg-Lengthening Surgery
UK Workers Face Stagnant Incomes and a Softening Labour Market as Unemployment Climbs
UK Passport Rules Tightened for British Dual Nationals Under New Travel Guidance
California Deepens Global Climate Alliance with New UK Pact and Major Clean-Tech Investment Drive
UK Supreme Court Tightens Rules on Use of ‘Milk’ and ‘Cheese’ Labels for Plant-Based Products
University of Kentucky Postpones Feb. 19 Law Enforcement Training Exercise in Lexington
‘The only thing illegal is Keir Starmer handing these islands to a country like Mauritius!’
JD Vance says Germany is “killing itself” by taking in millions of fake asylum seekers from culturally incompatible nations.
UK Markets Signal Opportunity as Starmer Confronts Intensifying Political Pressure
Trump Criticises Newsom’s UK Climate Pact, Defends Federal Authority Over Foreign Engagements
UK’s Top Prosecutor Says ‘No One Is Above the Law’ as Police Review Claims Against Ex-Prince Andrew
Businessman Adam Brooks weighs in on the reports that the US is set to help Hamit Coskun flee the UK, over free speech concerns
U.S. Attorney General Pam Bondi Releases 3.5 Million Pages of Jeffrey Epstein Case Files
US Secretary of State Marco Rubio Comment on European allies report blaming Russia for killing late Kremlin critic Alexei Navalny using toxin from poison dart frogs
Eighty-Year-Old Lottery Winner Sentenced to 16.5 Years for Drug Trafficking
UK Quran Burner May Receive Asylum in the US Amid Legal Challenges
Rubio Calls for Sweeping U.N. Reform, Saying It Has Failed to End Wars in Gaza and Ukraine
10,000 Condoms Distributed at Winter Olympics 2026 Athlete Village Depleted Within 72 Hours
Poland's President Advocates for Evaluating Independent Nuclear Weapons Development
Prince William Meets Saudi Crown Prince as Epstein-Andrew Fallout Casts Shadow
Starmer Calls for Renewed ‘Hard Power’ Investment at European Security Summit
UK Police Establish National Taskforce to Handle Domestic Epstein-Linked Allegations
UK Court Rules Ban on Palestine Action Unlawful in Major Free Speech Test
UK Faces Prospect of Net Migration Turning Negative as Economic Impact Looms
Mayor of Serdobsk in Russia’s Penza Region Resigns After Housing Certificates Granted to Migrant Family Trigger Public Outcry
Pentagon Reviews Anthropic Partnership After Claude AI Reportedly Used in Operation Targeting Nicolás Maduro
President Donald Trump and Hip-Hop’s Political Realignment: Pardons, Public Endorsements, and the Struggle Over Cultural Influence
China’s EV Makers Face Mandatory Return to Physical Buttons and Door Handles in Driver-Distraction Safety Overhaul
Goldman Sachs and DP World Executive Resignations: Elite-Reputation Risk and Corporate Governance Fallout From the Epstein Disclosures
‘Amelia’: The UK Government’s Anti-Extremism Game Villain Who Became a Protest Symbol
Peter Mandelson Asked to Testify Before US Congress Over Jeffrey Epstein Links
×