JEREMY Hunt’s “gilded giveaway” to higher earners was slammed today as the Chancellor scrambled to defend his multibillion-pound tax break on pensions savings.

Mr Hunt claimed that the abolition of the tax-free cap on the lifetime pensions allowance included in his Budget was needed to keep doctors in work as the NHS spends billions of pounds on agency staff.

But Labour pledged to reverse the “pensions bung for the 1 per cent” if the party wins power, amid criticism from economists that the “hugely wasteful” measure will cost £80,000 per worker.

Scrapping the allowance, standing at £1.07 million, will end up costing more than a billion pounds per year and, it is estimated, prevent 15,000 people from retiring early.

However, think tank the Institute of Fiscal Studies (IFS) warned that the pensions giveaway may not increase the number of people in work at all and could open an inheritance tax loophole.

IFS director Paul Johnson said it was disappointing that “overgenerous aspects” of pension taxation were not being reined in, “not least complete freedom from inheritance tax.

“I do think that if the fundamental problem it was trying to address was doctors, then it was a rather large sledgehammer to crack a very small nut — and a billion-pound sledgehammer at that,” he said.

IFS taxation researcher Isaac Delestre added that some workers may “even end up retiring earlier” thanks to the policy because they will need to put away less to reach their savings goal.

He said that the measure would benefit those with the ability to “build up very large pension pots” or who can contribute more than £40,000 a year to their pensions.

“Pension pots are entirely exempt from inheritance tax, so those are additional subsidies that are going to be handed out to people making very large savings under these reforms,” Mr Delestre added.

Labour branded the policy a “free-for-all for the wealthy few” that will “widen the cost-of-living chasm.”

Shadow chancellor Rachel Reeves said: “At a time when families across the country face rising bills, higher costs and frozen wages, this gilded giveaway is the wrong priority, at the wrong time, for the wrong people.”

Economists at the Resolution Foundation described the “unneeded tax break for wealthy pension savers” as “a big victory for NHS consultants but poor value for money for Britain.”