Budget 2023: Warning pension tax breaks may make some retire early

Tax breaks meant to encourage wealthy pension savers to stay in work for longer are "poor value for money" and may not work, a think tank has warned.

The changes, which were revealed in the Budget and could cost £1.2bn, may even encourage some to retire earlier, said the Resolution Foundation.

The government's independent forecaster said the plan could boost employment by 15,000, a fraction of the UK workforce.

The chancellor said it would keep more doctors in work, helping the NHS.

But Labour's Shadow Chancellor Rachel Reeves described them as a "£1bn pensions bung for the 1%".

Under the plans announced in Wednesday's Budget, the tax-free limit for pension savings during a lifetime will be abolished in April.

At present, people can save just over £1m before an extra tax charge is levied.

The annual allowance will remain in place, but will go up from £40,000 to £60,000, after being frozen for nine years.

Chancellor Jeremy Hunt insisted the move was the quickest and simplest way to solve issues with NHS doctors and consultants, who have been retiring early, reducing hours or turning down overtime for tax reasons.

However, the Resolution Foundation said the plan was "unneeded" and the benefits of it had been overstated.

It added that it would cost around £80,000 per extra worker, and that giving pension savers "very large wealth boosts will actually encourage some people to retire earlier than they otherwise would have done".

"It's a big victory for NHS consultants but poor value for money for Britain," said Torsten Bell, chief executive of the think tank.