The tax cut for people with pension pots worth more than £1 million defends a “basic, decent principle” of protecting those who work hard and save, a Cabinet minister said.
Oliver Dowden defended the move, which will cost £2.75 billion over the next five years, arguing it will encourage senior doctors, teachers and police officers to stay in work.
Chancellor Jeremy Hunt used his Budget to abolish the tax-free limit on pensions savings, which had stood at £1.07 million.
The Office for Budget Responsibility has estimated it could boost the workforce by 15,000 as people who might otherwise have retired to avoid breaching the lifetime allowance decide to stay on instead.
Senior Cabinet Office minister Mr Dowden told the BBC: “We’ve taken this action and the consequence of it is we’ll have more senior public sector workers working in the public sector, helping deliver on our core priorities, whether that’s cutting the waiting list, because we’ll have more consultants, whether that’s getting crime under control.”
Challenged that the wealthy individuals who benefit went far beyond public sector workers, Mr Dowden said: “I think it’s a basic, decent principle that if people work hard, they should be able to save money and invest for their retirement.”
Shadow Treasury chief secretary Pat McFadden said: “The vast majority of pensioners won’t benefit from the Government’s proposals because they will never get near a pension pot of more than £1 million.
“The Government should rethink this giveaway and instead focus on a scheme to deal with the early retirement problems facing the NHS.”