The Chancellor of the Exchequer, Jeremy Hunt's proposed changes to pensions rules in the UK have been criticized for favoring the wealthiest people in the country.
The announcement aims to abolish the pensions lifetime allowance, which currently stands at £1,073,100.
If people save more than this, they are likely to pay tax charges of up to 55% on the excess amount.
On 23rd March 2021, Chancellor Jeremy Hunt presented his overhaul of the UK pension system.
The standout point for most people is that the pensions lifetime allowance is to be scrapped, allowing people to save as much as they can.
According to the BBC's personal finance correspondent, "…it means that anyone can put as much money as they want into their pensions…" This is good news for those who can afford to save large sums of money each year.
However, for most workers, the budget offers little in terms of increased retirement savings.
"The increase in the pension contribution threshold from £6,240 to £8,060 will barely move the pension savings needle for most people," says Sarah Coles from Hargreaves Lansdown.
The decision to remove the pensions lifetime allowance has faced criticism, with some commentators calling it a handout for the very richest in Britain.
The Institute for Fiscal Studies (IFS) backs this criticism arguing that the wealthiest 10% will benefit the most from the new rules; the IFS also suggests that most people saving through a workplace pension scheme will be unaffected by the changes.
The Guardian further reports that there will be no concessions for low earners: "The poorest 80% of workers who have defined contribution pensions will get no benefit from the removal of the lifetime allowance."
The proposed UK pension overhaul has sparked debates over different opinions on what is considered fair in society.
Ultimately, the decision to remove the pensions lifetime allowance may be seen as "bizarre and reckless" given the UK's current economic situation, as noted by Paul Johnson, the director of IFS.
However, this change will give individuals who have the ability to make substantial savings the freedom to do so.
The changes will take effect from April 2021.