Stuart Lewis, Chief Executive of Rest Less, commented: “Increasing the £40k cap on tax-free annual pension contributions and the lifetime allowance on tax-free pension pots could encourage a small portion of highly specialised, high earners – such as doctors who have been leaving the NHS in their droves – back to the workplace but these changes will not make any difference to the vast majority of everyday people on average incomes. We don’t need the tax-payer to fund tax incentives that encourage people to save more than £1m in their pensions. Instead the government needs to make it more attractive for the hundreds of thousands of everyday workers to return to work.
“Increasing the money purchase annual allowance will have a bigger impact on a wider group of individuals and will allow more over 50s to return to work and continue to save into their pension without suffering a tax penalty.
“Trying to encourage large numbers of economically inactive over 50s back to the workplace with tax incentives for those with more than £1m in their pension, or who are saving more than £40K a year in their pension is like rearranging the deck chairs on the sinking Titanic – it’s absolutely pointless. The ONS survey of recent retirees via its Lifestyle Study issued in September 2022, showed that 58% of the retirees questioned said they’d consider returning to work in the future and 30% said flexible working was the most important aspect in a new role. This was followed by good pay (21%), being able to fit work around caring responsibilities (13%) and being able to work from home (11%).
“For the majority of people, the reason they left the workplace is not due to a lack of tax incentives on their pension, but rather a lack of access to relevant and flexible work which can fit around the sometimes complex and myriad other responsibilities faced by this demographic. The government would do far better helping to challenge outdated ageist stereotypes and incentivising businesses to hire midlife employees and build large scale attraction, retraining and retention programmes for more experienced workers.
“The latest ONS labour market data shows that economic inactivity is finally beginning to flatline after a steep increase during the pandemic. The cost of living pinch has given many retirees no choice but to take any role available. Offering access to flexible and meaningful paid work is key to attracting this key talent pool back into the workforce.”
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