Fresh speculation that the Treasury could reduce the pensions tax-free cash allowance in the upcoming Autumn Budget has prompted concern from industry experts about the potential impact on savers’ confidence and retirement planning.
Reports in the national press suggest chancellor Rachel Reeves is looking at proposals to reduce the amount people are allowed to take out of their pension tax free. The thinking is that this could raise around £2bn for the public coffers.
Currently, people can take up to a quarter of their pension tax-free, capped at £268,000.
Responding to the rumoured changes, Damon Hopkins, head of DC workplace savings at independent financial services consultancy Broadstone, said: “Although it is undoubtedly considered to be low-hanging fruit, the return of rumours around a tax grab on tax-free cash withdrawals is a little surprising given the regularity with which past and present chancellors have flown kites for this over the past years and the Treasury’s pushback about potential changes to pensions system.”
Hopkins urged employers and employees alike not to make rash decisions in response to speculation, warning that hasty action could backfire.
“It is important that savers do not act in haste and later repent. Given the ever-increasing rhetoric around the state of the UK’s finances, there are likely to be many, many rumours in the run up to the Autumn Budget so our suggestion would be to act with extreme caution and seek professional, independent advice if you’re considering taking any action in anticipation of any speculated changes,” he said.
With pensions a core part of the benefits landscape, HR leaders may face renewed questions from employees about the security of their retirement savings. Hopkins added: “It is always disappointing to see leaks and rumours around the Budget which only serve to increase anxiety, decrease confidence and often result in unfortunate consequences for the public, especially where the rumours don’t materialise.”
The Treasury has previously ruled out changes to the 25 percent tax-free lump sum, but repeated discussions in the lead-up to fiscal statements continue to spark uncertainty. For employers, the latest speculation highlights the importance of clear communications with employees about workplace savings and ensuring access to reliable, independent financial guidance.
