Labour to U-turn on lifetime pensions allowance in boost for wealthiest earners

The Labour party could raise capital gains tax in its first budget

Labour has reportedly abandoned plans to bring back the lifetime pensions allowance, in a move which will boost some of Britain’s most wealthiest earners.

Shadow chancellor Rachel Reeves has supposedly dropped the proposal from Labour’s manifesto following fears it would confuse savers and be difficult to reintroduce, sources told The Financial Times. 

In his budget last year, chancellor Jeremy Hunt ditched the lifetime pensions allowance, which was the total amount workers can build up in all their pension savings without incurring a tax charge.

The move, which came into effect in April 2023, was welcomed by high earners across the UK who were at risk of breaching the old £1.07m cap. 

At the time, Reeves vowed to reverse the change, describing the move as “the wrong priority, at the wrong time, for the wrong people”.

A Labour source told the outlet: “The Conservatives have botched their policy of abolishing the lifetime allowance, with thousands of people approaching retirement being left in limbo because of errors in legislation.”

“Labour’s priority is to bring stability and certainty back to the economy,” they added.

The opposition party is currency leading the Conservatives by 20 per cent.

It is a signal that Reeve, who will be the first female chancellor if Labour win the election, is trying to de-risk Labour’s manifesto to avoid being attacked by the Tories.

Her allies also told the outlet the party had not placed the £800m that would have been raised from reintroducing the LTA for any of Labour’s spending plans. “There will [be] no black hole as a result,” said one.

City A.M. has contacted Labour for comment.