Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss schedule 9.

Clause 14 and schedule 9 make changes to complete the abolition of the pensions lifetime allowance. By completing the work to remove the lifetime allowance charge, the Government will deliver the policy objective of incentivising highly skilled individuals to remain in the labour market or return to the workforce to build up their retirement savings, helping to grow the economy and to protect the quality of our vital public services. The Government have listened to stakeholders from across the public and private sectors, including senior NHS clinicians, air traffic controllers and senior police officers, who have said that pensions tax limits can and, indeed, do influence the timing of retirement and act as a barrier to remaining in or returning to the workforce.

The lifetime allowance limits the total amount of tax-relieved pension savings that an individual can have. It is set at £1,073,100, but individuals can contribute to their pensions over this limit. However, when members previously accessed pension benefits above the limit, they were subject to a tax charge called the lifetime allowance charge. At spring Budget 2023, the Chancellor announced that he would remove the lifetime allowance charge from 6 April 2023. The Office for Budget Responsibility estimates that around 15,000 individuals will remain in the labour market as a result, and many of them will be highly skilled individuals, including senior doctors in the NHS and many other public sector workers. The British Medical Association says that scrapping the lifetime allowance will be potentially transformative for the NHS.

The Chancellor also announced at spring Budget that the lifetime allowance would be removed from tax legislation entirely in a future Finance Bill. Clause 14 will deliver the necessary technical changes to entirely abolish the lifetime allowance from tax legislation. It clarifies the tax treatment of lump sums—that is where some pensions benefits are taken as a cash lump sum—paid from registered UK pension schemes. The new tax treatment ensures that lump sums do not, regardless of their size, become entirely tax-free. It will also clarify the tax treatment of transfers to overseas pension schemes and benefits paid from them. Finally, the clause sets out the arrangements for transitioning to the new pensions tax regime and reporting requirements under the new regime.

As we have heard from the Minister, Clause 14 intends to complete the abolition of the lifetime allowance, as announced by the Chancellor at last year’s spring Budget. When the Government announced their intention to abolish the LTA and the related charge, we in the Opposition made clear our concerns. Though we recognised the issue that the LTA presented to some professions, including doctors, we were concerned that the Government’s chosen approach would give some of the wealthiest in society a tax cut. We argued that this was not the right approach during a cost of living crisis, and at a time when taxes on working people are rising.

Clause 14, however, focuses not on the principle of the LTA charge but rather on the technical detail of how the Government are implementing abolition of the LTA. The Bill aims to make sure that legal effect is given to the change in time for 6 April this year, which we note is a very tight deadline for such a complex measure.

Let me first turn to how the Government propose to abolish the LTA. The Chartered Institute of Taxation has expressed concerns that the legislation in the Finance Bill on the abolition of the LTA is different from that which was published for consultation last summer. Indeed, the relevant part of the Bill comes in at nearly 100 pages —that is one-third of the Bill and two and a half times the size of the original legislation published last summer. With such a great degree of apparent change between the draft and final versions, there are of course likely to be many questions about details of the version before us, and about the Government’s intent. For example, the Chartered Institute of Taxation notes that the pension commencement excess lump sum aspect of the legislation that replaces the current lifetime allowance excess lump sum charge should be revised to meet the policy intent.

The Institute of Chartered Accountants in England and Wales notes not only the legislation’s length, but that it introduces new terminology and computations, increasing the risk of misunderstanding by taxpayers, advisers and agents. What representations has the Minister heard from industry groups about any approaches, terminology, or computations that are introduced for the first time in the final version of the legislation before us? What action has he taken on any representations he has received?

Given that the new rules take effect from 6 April, to many of those who are following this matter closely, it seems clear that it would have been wise to give more notice to pension schemes and individuals. The CIT notes that, for example, defined contribution pension schemes need to provide information to members about options for retirement at least four months ahead of nominal pension age. That means that scheme communications for those retiring in April this year would need to be clear and updated by December last year. Does the Minister believe that, because of the timing of this legislation, pension schemes may have communicated information to pension-holders that will turn out to be incorrect by April this year?

This legislation will gain Royal Assent presumably just two months or so before the new rules take effect. Clearly, pension funds will need new processes, systems, and member communications to be in place. What meetings has the Minister held with the pension industry about the requirements of this Bill, since its publication? Did any of the funds or groups he spoke to ask the Treasury to consider a different approach, or a different timetable for abolishing the LTA? Finally, on Government guidance and support, could the Minister confirm what he is doing to make sure that any guidance is fully and clearly updated in as much time as possible before 6 April?

The cost of living crisis is gripping families across the nations of the United Kingdom. They are struggling with rent, with mortgages, with food costs and with energy Bills. When we come to Clause 14, though the abolition of the lifetime allowance is necessary for certain professionals, including doctors, it benefits about as many bankers as healthcare workers. There were better ways for the Government to tackle this problem. What other options were looked at to avoid the undue rewarding of those who it was perhaps less necessary to include than healthcare workers?

The Minister said that 15,000 will stay in the workforce as a result of these changes. However, the changes have been criticised for actually complicating the pension system. Will he be reviewing the numbers that stay in professions such as healthcare? If 15,000 stay in the workforce, how many others are simply benefiting in other sectors such as banking?

I thank hon. Members for their comments. We seem to have had a bit of a U-turn from some Opposition Members and some political parties. There was considerable support for these measures across multiple sectors. These measures will benefit swathes of the public sector. I have already given quotes and there are plenty more from swathes of the medical and health service industry. The Royal College of Surgeons, for example, found that 68% of consultant surgeons were considering early retirement because of the old pensions rules. I do not know what more evidence hon. Members need to be convinced that this is a proper and appropriate move.

None of us disputes that this is a positive move for the public sector and for certain sectors of the economy, but perhaps the Minister could answer the question about those who perhaps are not so worthy.

The hon. Member is being rather selective. Swathes of the public sector will benefit: headteachers, police chiefs, clinicians, senior armed forces personnel, air traffic controllers, prison governors, senior government scientists, government-employed vets and so on. It is a point of principle that the tax system does not generally distinguish between occupations. To the point of the hon. Gentleman and others about timeliness, this is an issue that we needed to deal with immediately—not in three or five years’ time. There was an appropriate measure, and we took it.

It goes without saying that some people have benefited from similar schemes in the past. The Leader of the Opposition had a unique deal from his time as Director of Public Prosecutions, which allowed him to avoid tax on his savings. It is only appropriate that, in order to make sure that we retain people in the workforce and encourage people to come back to the workforce, we make these changes and make them in a timely manner. That is the broader point of the policy area, as opposed to the specifics of these changes. They have been subject to considerable consultation.

The hon. Member for Ealing North mentioned that there are about 100 pages of legislation. That is true, but let us be very clear: this is a clear and transparent simplification that has been welcomed by large swathes of the public sector. The vast Majority of the 100 pages of legislation he talked about remove references and concepts associated with the lifetime allowance. When we make changes, we need to remove references, and that was the bulk of the work.

As I said, this has been the result of extensive consultation. The Government have been consistently clear since the spring Budget of 2023 that the abolition of the lifetime allowance will be effective from April 2024. We have set out the timelines very clearly. We continued to work closely with industry, and HMRC will support the implementation of these changes. As I said, we have listened to stakeholder feedback and confirmed that we would not proceed with the previously proposed changes, for example to pension commencement lump sums and small lump sums. Once the changes have been made, they represent a significant saving for pensions.

Unlike the lifetime allowance excess lump sum, which is charged at 55%, the pension commencement excess lump sum is charged at the member’s marginal rate. So the pension commencement excess lump sum is only paid in connection with the commencement of a pension. The pension commencement excess lump sum allows individuals entitled to receive more of their pension on commencement as a lump sum than is provided for by the standard pension commencement lump sum. As I said, overall, these changes are welcomed and are a simplification. I therefore commend the Clause to the Committee.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Schedule 9 agreed to.