AJ Bell has launched a new parliamentary petition calling on the government to commit to a ‘Pension Tax Lock’, pledging not to change tax-free cash entitlement and tax relief for at least this Parliament.
The petition calls on the government to protect tax relief, which allows contributions to be made tax-free and taxed only in retirement and tax-free cash, which lets savers withdraw 25 per cent of their pot tax-free, up to £268,275.
The petition has attracted over 2,500 signatures so far, and 10,000 signatures will force the government to respond.
AJ Bell director of public policy Tom Selby says: “When people save in a pension they enter into a tax pact with the government. Take home pay today is sacrificed for the long-term, on the proviso that it will instead be taxed on withdrawal and comes with the added benefit of a 25% tax-free element.
“That is the foundation upon which the retirement plans of millions of Brits are built and requires a firm commitment to stability from government, matching the long-term financial decisions of savers making preparations for retirement.
“Individuals contribute to a pension in good faith and should not be subject to endless speculation government may move the goalposts before they access their money.
“Committing to a Pension Tax Lock would show government is serious about a fair deal for workers, allowing today’s savers to enjoy the same pension tax incentives as their parents. It would also lay down the gauntlet to any future government tempted by a pension tax raid, offering genuine security to savers through a policy commitment that doesn’t require any increase in government spending.
“The economy should benefit too, as more stability in the pensions system should give people confidence to boost their contributions – a large chunk of which will be invested in UK business. For an administration struggling desperately in the opinion polls a policy such as this, with appeal to older and younger voters alike, should be a no-brainer.”