Calls for pension reforms as more savers dragged into 55% tax band

While the country waits in anticipation for new Chancellor Jeremy Hunt to unveil the Autumn Statement on November 17, speculation is growing around what measures could be announced. With intentions to fill a £50billion ‘fiscal black hole’ caused by Liz Truss and Kwasi Kwarteng’s disastrous mini-budget, many people fear pension policies could be one of those to be adversely affected.Calculations from interactive investor show that a 45-year-old higher-rate taxpayer with a £300,000 pension pot, who contributes £1,000 a month would hit the pensions lifetime allowance (LTA) limit after 15 years, assuming a five percent per year growth. A lower-rate taxpayer would hit the cap after 17 years.Myron Jobson, senior personal finance analyst at interactive investor, commented: ‘With speculation growing about potential cuts in income tax relief on higher rate taxpayers, faith in the pensions system is shaky at best for many, and is causing palpable anxiety.’The potential extension of the period of no inflationary increases in the pension lifetime allowance means that more and more savers face paying a 55 percent tax charge on amounts above the LTA ceiling. It is another example of fiscal drag – which is the ultimate stealth tax.’The worry is pension savers who have been kicked around like political football, will miss out on valuable tax relief by deciding not to save more into their pensions in fear that they might exceed the LTA limit.’READ MORE: Scrapping triple lock will see Labour walk next election ‘Ultimate stealth tax’: Calls for reform as more pension savers dragged into 55% tax band (Image: GETTY)The lifetime allowance rules place a cap on the amount a person can save into their pension, which is currently £1,073,100.Alice Guy, personal finance editor at interactive investor, said: ‘Anything saved into your pension over this amount is taxed at a much higher rate, currently 55 percent for lump sum withdrawals.’Having a pension pot worth more than £1million may seem enormous but it translates to an annual defined benefit pension of £53,655, which is achievable for higher earning doctors and many others.’However, Ms Guy continued: ‘The rules are encouraging many doctors to retire early as they are worried about high tax charges.’The lifetime allowance was £1,500,000 when it was introduced in 2006, but it has been reduced over the years and then frozen, rather than increased.DON’T MISS:UK on edge of a recession as GDP weakens [ANALYSIS]Inheritance tax: How you can pass on wealth whilst still alive [EXPLAINED]State pensioners urged to check if they are owed up to £9,000 [INSIGHT] Fears around pension polices are growing as Autumn Statement approaches (Image: GETTY)’While market volatility this year has shown that a guarantee that is linked to ‘the highest of’ inflation, wages or 2.5 percent can be problematic, reforming the way the triple lock is applied, to a smoothed measure, rather than focusing discussions on its removal, could have knock-on benefits to NHS spending.’Mr Jobson continued: ‘Insufficient retirement income is a health risk and should be treated as such in policy discussions. The advantages of the state pension triple lock are numerous, and it should be preserved.’The policy has become a symbol for doing right by older people, but with public finances at its most stretched since the post-World War Two era, these are worrying times for current and future generations.’We need a public confidence boost in state and private pensions, rather than erosion.’