Financial advisers are seeing a significant spike in enquiries about tax-free cash, amid ongoing Budget speculation that this will pension perk will be curtailed.
DeVere Group says it has seen a 45 per cent increase in these enquiries in the last month alone.
Currently, pension savers can withdraw up to 25 per cent of their pension pot tax-free, up to a maximum of £268,275. But there has been widespread speculation that the Chancellor Rachel Reeves may cut or cap the maximum that can be withdrawn in November’s Budget.
DeVere says rumours have suggested this may be reduced to £100,000 or even as low as £40,000 as the government looks to raise revenue.
No official decision has been announced but the advisory firm says this uncertainty has prompted a marked rise in clients seeking guidance on how such changes might affect their retirement plans.
Nigel Green, CEO of deVere Group says: “There’s a growing sense of urgency among pension savers who fear that one of the most valuable and popular tax benefits in the UK could soon be scaled back.
“A 45 per cent rise in enquiries in just one month underscores how seriously people are taking the speculation.”
He adds: “Many clients are asking whether they should act now to secure their existing entitlement before the Budget, or wait for clarity.
“The answer depends on individual circumstances; but what’s clear is that confidence in the long-term stability of the UK pension system is being tested.”
The chief executive adds that any reform to the tax-free lump sum would have significant behavioural and economic consequences and erode trust in pension policy consistency. “People plan for decades on the basis of the rules in place. If the government moves the goalposts, it undermines the incentive to save for retirement and risks pushing people towards less efficient or riskier investment routes.”
The deVere CEO says the surge in client activity shows a broader truth: that financial planning is now being driven by policy risk as much as market risk.
“The speculation alone has already changed behaviour,” Green adds.. “Even if no change is ultimately made, the mere possibility of it has caused many to reassess their retirement strategies. And that’s a warning signal for policymakers.”
He adds that that there are concerns that this speculation could trigger a rush of withdrawals ahead of the Budget. “This would be counterproductive, not just for individuals potentially depleting their pots early, but for fiscal planning too.”
He adds: “Uncertainty over the tax-free lump sum is causing unnecessary anxiety for millions of pension savers.
“Clear communication from the Treasury would go a long way to stabilising sentiment and restoring confidence. Individuals should seek professional advice before making any irreversible pension decisions.”
