The new chancellor has been urged to end “damaging speculation” over the future taxation of pensions ahead of his first budget.
There were more than £10bn of excess pension withdrawals ahead of the 2024 Budget, with data expected to show similar pattern in 2025, after widespread rumours that the Rachel Reeves would restrict access to tax-free cash from pensions in this annual fiscal statement. No such changes were made.
As a result AJ Bell is calling for the John Healey to commit to pension tax stability in the run up to his first Budget, on October 28th. It says this will help avoid the kind of speculation that led to people making unnecessary changes to longer-term retirement plans.
It adds that there can be adverse financial consequences to accessing pensions funds early, including a loss of longer-term investment returns, restrictions on the the amounts the can subsequently be saved into pensions, and potentially higher marginal tax to pay, depending on the sums taken.
In a submission to the Treasury, AJ Bell says a pre-Budget commitment to pension tax stability throughout this Parliament would allow Healey to ensure there is no repeat around his forthcoming Budget or future fiscal events.
This is part of AJ Bell’s long-running campaign for a ‘pension tax lock’, where it would like the government to commit to no further changes to tax incentives around pension savings.
AJ Bell CEO, Michael Summersgill, says: “Savers lit a £10bn distress flare at the 2024 Budget, which was never extinguished. To avoid another damaging repeat, Chancellor John Healey must side with savers by committing to pension tax stability now.
“A pledge of certainty would not cost a penny in new Treasury spending and put an end to rumours that have damaged household finances and the economy.
“The Chancellor should be laser-focussed on boosting growth and getting households onto a sound financial footing. Ending a phenomenon that has seen tens of billions taken out of investments and parked in cash should be right in his crosshairs.”
