Pension reforms to get people over 50 back to work are being examined by ministers.
In a key speech on the economy yesterday, Jeremy Hunt calls on older people who have stopped working during the pandemic to return to help alleviate the chronic labor shortage.
Referring to financial incentives, the Chancellor said: “To those who have taken early retirement after the pandemic or have not found the right job after furlough, I say ‘Britain needs you’ and we will look at the conditions that are necessary to make work worthwhile while.’
Sources in Whitehall said this could mean raising the £1m lifetime benefit for tax-free retirement savings.
In a key speech on the economy yesterday, Jeremy Hunt called on older people who have left the workforce during the pandemic to return to help alleviate chronic labor shortages
Referring to financial incentives, the Chancellor said: “To those who have taken early retirement after the pandemic or have not found the right job after furlough, I say ‘Britain needs you’ and we will look at the conditions that are needed to make work worthwhile while’
This limit has been blamed for thousands of doctors and other professionals taking early retirement.
“We’re looking at pension reforms to make sure people aren’t discouraged from working longer,” says a source.
The main objectives are to encourage people to return to work – and to prevent them from leaving.
The government is also looking into proposals to expand ‘mid-life MOTs’ to include pension advice for people considering early retirement, fearing thousands will leave the workforce without enough savings to properly fund their retirement.
A source says: ‘We want to achieve a situation where someone who is thinking about retiring early will first sit down with a pension advisor to discuss whether it makes sense to retire.
“Right now, many are finding themselves out of money or realizing they can’t afford to live.”
Shaking up pensions is one of many ideas being considered as part of a major “workplace overhaul” spearheaded by Mel Stride, Secretary of Work and Pensions.
Ministers are also looking at childcare reforms to make it more attractive for stay-at-home mothers to return to work.
People with mental health problems and back problems receive extra support to be able to do all the jobs that are suitable.
And ministers are considering tightening the benefits regime to make it more difficult for people to claim alms if they could have a paid job.
About 2.2 million people registered as long-term sick can look for work for the first time.
Mr Hunt said yesterday that around five million working-age Britons chose not to work – a figure he described as ‘an enormous and shocking waste of talent and potential’.
He added: “We will never realize the full potential of our country unless we unlock it for all our citizens.
The UK has some of the lowest unemployment rates in half a century, but employment has also fallen, with a spike in the number of people classified as ‘inactive’
The number of people out of work due to long-term illness has increased by about half a million since the beginning of 2019, figures show
While the number of people who are economically inactive with attitude-related problems has risen by 62,000, the number of people with depression has returned to pre-pandemic levels, the ONS said.
“We won’t solve our productivity puzzle either unless everyone who can participate does.”
The number of unemployed has risen by about half a million since the pandemic, driven by an increase in the number of over-50s leaving paid work.
Labor shortages are blamed for driving up inflation and contributing to the country’s sluggish productivity growth.
The government is resisting pressure from business to relax immigration rules to counter the end of free movement with the EU.
Mr Hunt said yesterday that both business and the state need to do more to ensure that British workers have the skills they need.
But he also said the nation cannot afford so many millions to choose not to work.
Ministers have been criticized for repeatedly looting pensions by lowering tax thresholds to the point where far better paid workers are penalized for working late.
The lifetime benefit, which was £1.8 million in 2012, has been reduced in stages to its current level of just over £1 million.
It should be frozen until 2026, despite the ravages of inflation.
At the same time, the annual allowance for the tax-free total that employees can contribute to their pension each year has been reduced from £255,000 to just £40,000.
The limits have been blamed for forcing thousands of hospital doctors to quit in their late fifties or early sixties.
But professionals in other sectors are now also affected, especially final salaries.
Tory MP Dan Poulter said “punitive” rules make it “unviable” for many doctors to continue working.
Treasury insiders said talks were at an early stage – and it was questioned whether Mr Hunt would be able to act against the March budget given tight restrictions on public finances.
In his speech yesterday, the Chancellor acknowledged Britain needed a tax cut but warned it would have to wait for inflation to be tamed.
He said the March budget would have “unlikely much room for significant tax cuts” despite pressure from Tory MPs and the business community.
Mr Hunt said the main economic focus this year would be tackling rising prices. He said, “The best tax cut right now is to cut inflation.”
But he also recognized the need for further cuts in the record tax burden once inflation is brought under control.
He said more than a million companies have been set up since 2010, but Britain needs “lower taxes” to create the next million.
“We have to be explicit,” he said. High taxes directly affect the incentives entrepreneurs, investors or larger companies take to pursue their ambitions in Britain.
“With volatile markets and high inflation, sound money must come first. But our ambition should be to have nothing less than the most competitive tax regime of any major country. That means restraint in spending.’
Mr Hunt lashed out at the ‘declinism’ being spread by Labour, saying Britain was well placed to exploit ‘the growth sectors that will define this century’.
He said gloomy projections “do not reflect the whole picture” and argued that the economy held up well compared to key competitors.
Mr Hunt claimed ministers could boost the economy by tearing up the EU’s red tape holding back investment and productivity, saying growth will be ‘built on the freedoms that Brexit offers’.
Mr Hunt’s speech had mixed reactions from the business community. CBI chief Tony Danker said he was right to “shift into a different gear” and focus on growth, adding: “He now has a strong framework for growth.
“And we hope that the budget shows strong action in less than two months.”
But Shevaun Haviland of the British Chambers of Commerce said there was ‘very little meat on the bones’.