Savers have started to withdraw cash from their pension pots amid fears over potential tax changes at the autumn budget, according to two investment companies.
The investment platform AJ Bell said reports that the chancellor, Rachel Reeeves, was likely to increase taxes at the budget on 30 October had spooked some of its customers into new retirement savings decisions.
The wealth management firm Quilter, which manages more than £113bn of customers’ money, also said it had experienced a surge in calls from customers wanting to withdraw cash from their pension plans.
Michael Summersgill, the chief executive of AJ Bell, said on Thursday: “Pensions are the primary retirement savings vehicle in the UK and customers are unsurprisingly sensitive to changes in their tax treatment. We have seen a noticeable change in both customer contributions to pensions and tax-free cash withdrawals.”
AJ Bell has called on the Treasury to commit to a pension “tax lock” in the budget to give certainty over the rules in the coming years.
Under current rules, savers who are 55 and over can withdraw 25% of their pension pot without incurring any tax charges up to £268,275. But it has been suggested that Reeves could opt to change those rules after the leftwing thinktank the Fabian Society recommended the government dropped the threshold to £100,000.
Reeves is also rumoured to have considered a 30% flat rate of tax relief on pensions contributions, rather than basing relief on the income tax each individual pays. However, the chancellor reportedly backed away from the proposal after public sector unions warned it would hit 1 million of their members and erase the benefit of public sector pay increases the government had just agreed.
AJ Bell and Quilter have written to the Treasury to express concern around potential pension tax changes. Quilter said customers had contacted it to withdraw cash from their pension pots “often without a clear understanding of the potential long-term consequences”.
Steven Levin, Quilter’s chief executive, said: “We urge the government to provide a clear roadmap and ensure any changes to pension tax policy are introduced with ample consultation and an implementation period.
“Stability and predictability are crucial for sound financial planning, and a well-informed public is essential for maintaining confidence in the pension system.
“A prompt statement from the Treasury, advising against changes to pension arrangements pre-budget, would be highly beneficial.”
Summersgill said the change in customer behaviour represented “significant decisions for individual customers” but had not had a significant impact on AJ Bell. The firm is one of the largest investment platforms in the UK, with 542,000 customers
AJ Bell reported a 45% jump in cash inflows, to £6.1bn in the year to 30 September, pushing total assets under management up 22% to a record £86.5bn.
“While the upcoming budget has introduced unhelpful uncertainty, we remain positive about the outlook for AJ Bell and the platform market more broadly,” Summersgill said.