AJ Bell urges Chancellor to commit to ‘tax lock’ on pensions

AJ Bell has called on the Treasury to commit to a “pension tax lock” in the autumn budget after contributions fell in recent weeks.

The investment platform told investors on Thursday that there had been a “notable change in both client pension contributions and tax-free cash withdrawals” ahead of the October 30 budget.

Chief Michael Summersgill said AJ had made “deputies” to Rachel Reeve’s department in a bid to ensure “stability on key pension tax legislation, at least for this parliament”.

Under current rules, savers receive pension tax relief based on their income tax rate.

Basic rate taxpayers receive a 20 per cent relief, while higher and additional rate taxpayers receive 40 and 45 per cent respectively.

Rachel Reeves is expected to consider a proposal from Treasury officials for a flat rate 30 per cent pension tax cut.

The Treasury could also try to restrict people’s right to receive tax-free cash when they access their pension fund.

Another potential target is pension funds, which fall outside the inheritance tax net.

Summersgill said: ‘Pensions are the main retirement savings vehicle in the UK and, unsurprisingly, clients are sensitive to changes to their tax treatment.

‘Amid increased press coverage ahead of the upcoming Budget, we have seen a notable change in both client pension contributions and tax-free cash withdrawals.

“While these behavioral changes do not have a material impact on AJ Bell’s business performance, they represent important decisions for individual clients.”

In its year-end trading update published on Thursday, AJ Bell announced that investors using its platform deposited £6.1 billion into the group in the last year, amid a 14 per cent rise in the number of clients.

AJ Bell saw inflows rise 45 per cent on last year, taking the platform’s total assets under management to £86.5 billion, above Investec forecasts.

The group said: “Gross and net inflows across the platform were significantly higher than the previous year, driven by continued investment in the AJ Bell brand and propositions along with increased retail investor confidence compared to the year former”.

Summersgill added: ‘Our strategy focuses on our dual-channel platform serving both the advised and (direct-to-consumer) platform markets using a single technology platform and operating model.

“This maximizes our growth opportunity within the platform market, while also making it very efficient to operate.”

Analysts at Investec said: “Given the outperformance delivered by Quilter and IntegraFin during the quarter, we believe AJ Bell’s online performance can be seen as a slight negative.”

AJ Bell stock fell 1.51 per cent or 7.25 pence to 473.75 pence on Thursday, having risen more than 80 per cent in the last year.