- Chancellor Rachel Reeves should use her first Budget to make a long-term commitment to stability in the pension tax system, AJ Bell chief executive Michael Summersgill says
- A report in The Times this morning suggests that while fundamental pension tax relief reform is unlikely on 30 October, cuts to pensions tax-free cash are being considered
- Constant rumour and speculation about the future of pension tax incentives risks making people fearful about long-term saving or taking decisions that are not in their best interests
- AJ Bell survey reveals 99% of advisers say they’ve seen tax and pension queries from clients concerned about the forthcoming Budget*
- Customer contributions to AJ Bell pensions were up 59% in September 2024 compared to the same month in 2023 and the number of customers accessing their tax-free cash in September was 32% higher than the average for the past year
- A cast-iron guarantee from Labour not to change tax relief or tax-free cash entitlements while in government would give Brits greater confidence to save and invest for their financial future
Michael Summersgill, chief executive at AJ Bell, comments:
“Constant rumour and speculation about the future of retirement tax incentives – primarily the tax treatment of pension contributions and tax-free cash on retirement – are hugely damaging. People are taking financial decisions in part based on pre-Budget speculation and it chips away at people’s confidence in pensions generally.
“Our customer data reflects this uncertainty, with pension contributions up by almost 60% in September versus the same month last year and the number of people accessing their tax-free cash around a third higher than the average during the past year.
“Furthermore, almost 100% of advisers we surveyed said they’ve dealt with tax and pension queries from clients concerned about the Budget, with a third saying they had seen an increase in clients wanting to take tax-free cash in anticipation of a pensions tax raid in the Budget.
“The chancellor has an opportunity to nip this in the bud by using her inaugural Budget to publicly commit to a pact on pension taxation. A clear promise to deliver tax stability on pensions for at least a decade would provide much needed certainty to savers across the country.
“When we commit money to a pension, the deal is that we sacrifice spending power today so that we can provide for ourselves later in life. Even the perception that government might renege on the terms of the deal risks people taking actions which may not be in their best interest.
“Rumours about the future of tax-free cash, one of the best understood and most valued benefits of pensions, are particularly problematic. Taking your tax-free cash is an irreversible decision and, assuming the chancellor doesn’t pursue a disastrous raid on tax-free cash, those people may find they’re in a worse financial position long-term. A concrete pension tax pact would allow hard-working savers and retirees to focus on their long-term goals, rather than being knocked off course by speculation of future changes.”
*Based on 131 responses to an online survey of advisers carried out between 30 September and 2 October 2024.