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‘I retired early – but pension reforms mean it will finally pay to go back to work’

Trevor Osbourne - John Lawrence
Trevor Osbourne - John Lawrence

It has been a week since Chancellor Jeremy Hunt announced he would be abolishing the lifetime cap on tax-free pension savings – and the Tories are wasting no time in making it happen.

On Tuesday the motion was passed in the House of Commons, meaning from April 6, workers will be able to save as much as they want in their pension without incurring hefty tax charges.

Labour voted overwhelmingly against and pledged to reinstate the savings cap, known as the "lifetime allowance", if the party wins the general election.

The opposition says the decision favours the richest 1pc and questioned whether it will galvanise a return of retirees to the workforce in a bid to boost the economy, as the Conservatives hope.

But Mr Hunt’s plans have already altered the retirement plans for those who felt as though the lifetime allowance had forced their hand.

Trevor Osbourne, an IT manager at Mercedes-Benz, had already exceeded the £1.07m pension limit well before his planned retirement age. In July, his self-invested pension was worth £1.1m. Knowing he faced heavy tax charges of up to 55pc when drawing on the pot, Osbourne, 51, planned to retire by age 55 despite his desire to keep working.

“I’d looked at the numbers and it just wasn’t worth it,” he says. “My pot was at the limit and all I could see is that I was being pushed into retirement as any income would have been taxed at 55pc.”

He adds: “I enjoy my job – it gives me a sense of purpose. I didn’t want to be forced out of the workforce at a time when I’m getting to the peak of my skills and my earnings.”

Following the Chancellor’s decision, Mr Osbourne is reconsidering his plans. “I am definitely no longer planning on retiring early,” he says. “With these changes, I feel I’ve got control and I can choose my retirement age rather than having an arbitrary date forced on me.”

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Andrew Skidmore, a 63-year-old in Warwickshire, retired early last year after his pension hit the cap.

Skidmore, who worked as an engineer for over four decades, says he would now consider returning to work after the cap was abolished. “I would be more inclined to pick up part-time work,” he says. “It becomes more profitable, and you feel like you are back in charge of your own finances again.

“Before, it felt that there was no point in saving for the future.”

However, Skidmore adds that the persistent tinkering with the rules makes it difficult to plan.

He says: “In recent years, the Conservative Government has reduced the lifetime allowance, frozen it, and now are abolishing it. How are you supposed to plan for the future when it is constantly changing?”