Chancellor Rachel Reeves is under fire after refusing to commit to a “pensions tax lock” that would protect savers from potential raids on their retirement funds.
The Chancellor has declined to guarantee that tax-free withdrawal limits and contribution relief will remain untouched, prompting accusations that she is deliberately ignoring the harmful effects of ongoing speculation.
Industry experts and former government ministers have warned that her unwillingness to provide clarity has created a damaging cycle of uncertainty ahead of fiscal announcements.
This speculation has already prompted many pension holders to make hasty withdrawals from their retirement savings, often leaving them financially worse off as a result.
Two former pensions ministers have now called on Ms Reeves to provide assurances that she will not target retirement savings with tax changes.
Steve Webb, currently at consultants LCP said: “There is clear evidence that the speculation in the run-up to the 2024 and 2025 Budgets was damaging, as many people made premature decisions to access their pensions for fear of Budget tax changes.”
Without a commitment to protect tax-free cash for the remainder of this Parliament, the same pattern could recur annually, he explained to the Daily Mail.
Fellow former pensions minister Ros Altmann echoed these concerns, stating: “The constant concerns and speculation are depleting people’s pension funds.”
The constant concerns and speculation are depleting people’s pension funds
|
PATom Selby, director of public policy at investment firm AJ Bell, accused the Chancellor of comprehensively failing to deliver the certainty that pension savers desperately need.
His firm launched a petition demanding the introduction of a pensions tax lock, but this was rejected by the government.
Ms Selby said: “The Government is now knowingly turning a blind eye to the consequences and refusing to do anything to address it.”
Under current rules, savers can access a quarter of their pension pot without paying tax from age 55
|
GETTYHe warned that this approach creates a serious risk of repeated turmoil, stating: “This runs a real risk that each Budget until the next general election will be met with the same doom loop of unbridled rumours about the fate of pension tax incentives.”
Under current rules, savers can access a quarter of their pension pot without paying tax from age 55, with the maximum tax-free amount capped at £268,275.
Annual contributions of up to £60,000 also benefit from tax relief.
In the lead-up to both of Ms Reeves’ Budgets, rumours circulated that she might dramatically reduce the tax-free lump sum to as little as £40,000 and remove contribution relief for higher earners.
While these specific changes did not materialise, the Chancellor did bring pensions within the scope of inheritance tax for the first time.
She also imposed National Insurance charges on employer pension contributions.