The lifetime allowance (LTA) on pension savings is set to rise to £1.8m in tomorrow's UK Budget, it has been widely reported.

The increase is set to be introduced to encourage people to continue working. The LTA is the maximum anyone can contribute to a pension - at present £1.07m - before facing tax charges.

The BBC reports that the chancellor could also increase the £40,000 annual cap on tax-free contributions to pensions. However, the report said the Treasury had declined to comment.

Higher earners, particularly doctors and consultants have faced issues with the LTA in recent years which has contributed to many taking early retirement in the face of tax charges on their pension contributions.

Newspaper front pages including the Daily Telegraph and The Times also reported on the move, both pointing to it encouraging people to remain in work.

The Times said the increase to the LTA would be a record £1.8m and benefit 2 million people. It also reported the annual allowance would go up to £60,000.

An article in the Daily Mail featured the story on Friday last week ahead of tomorrow's Budget speech.

The LTA was originally set at £1.5m when it was introduced on A-Day in 2006. It gradually rose to £1.8m in 2010 but fell to just £1m in 2016.

LCP partner and former pensions minister Steve Webb said: "If these rumours are true, these jaw-dropping changes could be a game-changer for those who are currently limited when it comes to saving into a pension. Up to 2 million people who have already breached LTA limits, or could expect to do so, will now find it worth exploring saving more into a pension. 

"A big change could also remove some of the complexities of the system, as those who had previously locked into LTA at £1.5m or £1.25m on condition of no further pension saving would be free to save more. The changes could also be a windfall for those with large pensions on the brink of retirement, who would now pay far less tax when they access their pensions."

He added there would be a "boom" in the financial advice sector: "Financial advice firms will be cancelling all holidays for their advisers as they will face a surge in demand following the Budget. In addition to the normal rush of activity to meet the 5 April deadline, this year people may be looking to review their pension savings plans not just in future years but even in the current financial year. We are likely to see a surge in interest in saving more for a pension and pension providers may also need to gear up to deal with the increased demand."

Hargreaves Lansdown head of retirement analysis Helen Morrissey said speculation had reached "fever pitch" on the issue.

"Speculation has now reached fever pitch that we are going to see enormous hikes in the lifetime, and possibly annual allowances, in tomorrow's Budget. After years of cuts and stagnation, this would breathe new life into people's retirement planning and could be instrumental in helping groups such as senior NHS consultants to remain in the workforce," she said.

"As yet, there is no word on whether such changes will be part of a wholesale review of the pension tax system which has grown large, unwieldy and complicated - such a review is well overdue and could look at reform of rules such as the money purchase annual allowance. By restricting people who have already flexibly accessed their pension to contributions of £4,000 per year, this rule is a real obstacle in the path of anyone wanting to rebuild their pension after time out of the workforce. At a time when the chancellor is trying to tempt older people to return to the workforce, such a move would be welcome."