City top boss warns against pension raid: St James’s Place boss says tax rises will discourage savers

The boss of St James’s Place has warned against a tax raid on pensions which could hurt investment in the UK.

Mark FitzPatrick’s warning came amid mounting evidence that panicked savers have withdrawn cash ahead of next week’s Budget.

The wealth manager’s chief executive said the tax changes could “lead to unintended harmful consequences” by discouraging people from saving just when the Government hopes more of that money could be used to boost economic growth.

That growth is the only way the UK can afford to pay for the necessary investments in public sector assets such as schools and hospitals, he argued.

St James’s Place, which manages funds worth £184bn, has already revealed that budget uncertainty is affecting clients. Rivals like AJ Bell are also seeing customers take action.

FitzPatrick wrote in the Mail: “With the Government’s aim to increase investment in British assets and growth, we should avoid doing anything that would reduce investment further.”

Speculation is growing that Chancellor Rachel Reeves will reduce the tax-free lump sum savers can withdraw from their pension funds.

When people turn 55, they can withdraw 25 per cent of the total tax-free, up to a maximum of £268,275. Reeves is rumored to be considering a cut to £100,000.

Such a change would change the goals of savers who have spent years carefully saving cash with the goal of withdrawing it now to pay a mortgage, finance their children’s college education or help them afford housing.

That could discourage people from saving for retirement, FitzPatrick warned.

The former chief executive of insurer Prudential said budget speculation was “widespread”, adding: “This is causing uncertainty and leading to changes in consumer behaviour, some of which may not be in their long-term interests.” term”.

“Once the tax-free cash is withdrawn, very often the potential pension-related benefits are lost forever.”

He urged savers to give a “proportionate and sensible response” to any changes to their personal finances rather than any “hasty reaction”.

And FitzPatrick – who succeeded Andrew Croft at St James’s Place a year ago – pointed out that Reeves’ potential tax raid comes at a time when UK stock markets are already suffering a damaging outflow of funds.

Meanwhile, the Government is trying to revive investment in British assets, in part by unlocking trillions of pounds of accumulated pension savings.

“This Government knows, better than anyone, that a growing economy is the only way to generate the scale of tax revenue needed to invest in the public sector,” FitzPatrick said.

“It is for this reason that I would encourage the Chancellor to carefully navigate the path towards 30 October.

‘With a challenging fiscal situation, I believe all of us who are privileged to be better off should expect to contribute more if our Government asks us to.

But the Chancellor will also know that tax increases must not have unintended harmful consequences, such as discouraging those saving for pensions.’

The Government’s own financial advice website, MoneyHelper, has even acknowledged the uncertainty savers face over the 25 per cent tax-free lump sum.

It says: “Nothing has been officially announced or confirmed, so there is no need to make quick decisions about your pension at this time.”