Retirement savers on high incomes have been given a boost after Jeremy Hunt confirmed he will abolish the pensions lifetime allowance.
The lifetime allowance is how much you can save into pension pots before paying extra tax.
This figure is currently set at £1.07million but will soon be scrapped, the Chancellor announced in his Budget this afternoon.
The lifetime allowance was first introduced in 2006 and was originally set at £1.5million.
It rose to £1.8million by 2012 but has been continually slashed over the years. It was due to be frozen at £1.07million until 2026.
The lifetime allowance charge will be abolished from April 2023 before being scrapped altogether from April 2024.
The pension annual allowance - the most you can save each tax year before you have to pay tax - will also increase from £40,000 to £60,000, the Chancellor said today.
The changes are part of plans to keep people working longer and to encourage over-50s who had taken early retirement back into work.
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However, critics have said raising the lifetime allowance will benefit the wealthiest of workers.
Addressing the House of Commons today, Labour leader Sir Keir Starmer says the tax cut to pensions will only affect the richest 1% of the country.
Analysis from the party suggests someone with a £2million pension pot can pay £275,000 less in tax.
But others praised the move, and said it simplifies the pensions system.
The lifetime allowance applies to defined benefit and defined contribution pension schemes and is an extra tax paid over the threshold.
You pay a rate of 55% tax on pension savings above the lifetime allowance if you receive your money as a lump sum, or 25% if you get it any other way.
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The state pension is not included when calculating your lifetime allowance.
But critics have pointed out that the change in the lifetime allowance does not mean you won't face paying tax on your pension.
You can still take 25% tax-free cash from a pension, but now this has been capped at £268,275 after the lifetime allowance was abolished.
Those individuals who already have a protected right to take a higher tax-free lump sum will continue to be able to do so.
David Stevens, retirement director at LV= said: “Scrapping the lifetime allowance (LTA) and increasing the annual allowance will be welcomed by pension savers throughout the UK .
“The freeze to CPI rises in the lifetime allowance (LTA) from April 2021 had disappointed many savers and many people will be celebrating the Government’s announcement to scrap the LTA.
“It penalised good investment decisions and removing it will simplify a complex pensions tax system.
“The increase to the annual allowance (AA) to £60,000 is also the first since April 2010, but it is still significantly lower than its previous highest amount of £255,000 12 years ago.”
For those with more average salaries, the maximum annual amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000.
