Hunt is considering pension changes to the budget in an effort to boost the workforce

It is understood the chancellor is looking at increasing the Lifetime Pension Allowance (LTA) in a move that is being interpreted as an attempt to reverse the trend of early retirement.

The PA news agency understands that Jeremy Hunt is considering allowing workers to put more money into their pension fund before they are taxed as part of his budget package.

Mr Hunt is keen to boost Britain’s workforce while looking to fulfill the Prime Minister’s pledge to grow the UK’s ailing economy.

The lifetime allowance is currently £1.07m, with savers incurring tax after exceeding the personal pension minimum.

Reports differ on how much Hunt could put into the LTA in his financial statement on Wednesday.

The Times said the chancellor would raise it to £1.8m, while The Daily Telegraph said it could be more than £1.5m.

It is also understood that the budget could see an increase in the annual premium rate for pensions, with Mr Hunt tasking his advisers with calculating how much change would cost the Treasury.

The Telegraph and The Times said the amount each person could save each year before taxes were likely to rise from £40,000 to £60,000.

In his Bloomberg speech earlier this year, Hunt pledged to consider financial measures that would help people over 50 who retired early during or after Covid-19 get back to work.

Speaking in January, he said employment levels were about 300,000 people lower than they were before the coronavirus pandemic.

Mr Hunt said: “So, to those who have retired early after the pandemic, or have not found a suitable role after the holidays, I say: Britain needs you.

“And we will consider the conditions necessary to make the work worth your time.”

The life pension allowance was first introduced in 2006, when it was set at £1.5m.

It rose to a peak of £1.8m by 2012 before being gradually lowered.

It was due to stay at £1.07m until 2026, but Mr Hunt can choose to make a change.

The British Medical Association (BMA) has described the current LTA rate as “punitive” and argued that it encouraged doctors to leave the profession.

On its website, the Bahrain Monetary Agency said: “High contribution rates, significant wage erosion and a punitive pension tax system have not only resulted in an extremely high cost of membership to the scheme for senior doctors, but also in their access to reduced pensions.

“This has resulted in large numbers of physicians retiring early or having their hours reduced.”

In January, former Pensions Secretary Baroness Altmann pressured ministers to change “illogical” pension rules to help ease the NHS workforce crisis.

During a debate in the House of Lords, the Conservative fellow said that “even middle-income earners” were finding that their “supposedly tax-free pension contributions” were “making them huge tax demands that could exceed even extra earnings”.

She said it meant that some doctors were “effectively paying to work for the NHS” and that the current system “incentivizes people not to work”.

The Treasury Department said it does not comment on budget speculation.

Meanwhile, the chancellor has confirmed that £63m will be made in his budget to help public swimming pools stay open in the face of soaring energy bills.

More than £20m of the fund will be made available for one year in grants for leisure centers with parks that deal with immediate cost pressures, while £40m is earmarked for investment in decarbonisation and long-term energy efficiency measures.

The Treasury said leisure centers with swimming pools are responsible for up to 40% of a local authority’s carbon footprint due to the need to heat bathing water to safe temperatures.

Mr Hunt said: “High bills are hitting us all hard and community gatherings have been thrown in the deep end.

“I know they are loved by millions of people. This vital lifeline will keep them afloat.”