Labour has stepped up pressure on Rishi Sunak and Jeremy Hunt to drop changes to pension allowances that fail to benefit the “vast majority” of Britons.
The Opposition has said it will reverse the Chancellor’s Budget pensions tax break for high earners if it gains power at the next general election.
Mr Hunt believes the abolition of the lifetime allowance, forecast to cost £2.75 billion over the next five years, will ease labour shortages, particularly in the NHS.
He has argued it will encourage older workers, including senior doctors, to remain in employment rather than retiring early as their pension pots reach the current £1.07 million tax-free lifetime limit.
The Office for Budget Responsibility (OBR) watchdog has estimated the shake-up of pensions allowances – which also included lifting the annual amount people can pay in from £40,000 to £60,000 – could increase the workforce by 15,000 people.
But Labour pointed to figures showing that in 2020-21 only 8,600 people incurred charges due to breaching the lifetime allowance – 0.01% of the population.
The £1 billion annual price tag for the package of pensions reforms meant that it cost £70,000 for each of the 15,000 workers the OBR believes will stay in employment.
Shadow Treasury chief secretary Pat McFadden said: “In the run-up to the Budget, Labour called on the Government to deal with the pension problems facing doctors. Indeed, we were attacked for doing so by the Conservatives who said such a proposal was unaffordable.
“The vast majority of pensioners won’t benefit from the Government’s proposals because they will never get near a pension pot of more than £1 million.
“The Government should rethink this giveaway and instead focus on a scheme to deal with the early retirement problems facing the NHS.”
Treasury Chief Secretary John Glen said Labour should “stop playing politics” on the issue.
“Just a few months ago, Labour said they would abolish the lifetime allowance saying it would mean ‘patients are seen faster’ and ‘lives would be saved’,” he said.
“The Conservative government want to put more doctors on the front line of our NHS to cut waiting lists – Labour need to explain to the British people why they disagree.”