Let’s not touch our pensions! Reeves said amid panic over budget tax raid on retirement funds

Rachel Reeves has been urged to rule out a new tax raid on pensions for the rest of this Parliament to avoid a repeat of the panic over her first budget.

In a powerful intervention for those saving for retirement, former pensions ministers aligned themselves with industry bosses to seek reassurance from the Chancellor.

They told the Mail that certainty was needed, after rumors of tax changes in Labour’s first budget in 14 years sparked a rush to cash out pensions.

Former Pensions Minister Steve Webb said the “constant speculation” over changes to pension taxation was “very damaging”.

And in an article in the Mail, AJ Bell chief executive Michael Summersgill called on Reeves to commit to a “pension tax lock” that promises “not to upset the fundamentals of the pension tax system at this time.” Parliament”.

Ahead of the October budget, speculation mounted that Reeves was planning a tax raid on pension funds as he struggled to make his numbers add up.

Among the options were cutting tax relief on pension contributions for higher earners and cutting the amount savers can withdraw tax-free at the age of 55 from £268,275 to £100,000.

The threat to the tax-free lump sum proved particularly damaging as savers rushed to withdraw cash from their pension funds, despite warnings it would leave them worse off in retirement.

Reeves ultimately decided against such a move, but instead introduced a new inheritance tax by dragging pension funds into the inheritance tax for the first time.

It is now under pressure to rule out further changes, giving savers the certainty they need to plan for their retirement.

Ros Altmann, another former pensions minister, said: “The chancellor needs to think carefully about the damage caused to make sure she does not do more.”

Webb, now a partner at pensions consultancy LCP, called on Reeves to “confirm that the pension tax relief system will remain undisturbed for the next five years”.

He added: ‘This would create a welcome period of stability. The constant speculation about changes to the pension tax cut is very damaging and even led some people to make poor financial decisions in the run-up to the October budget for fear of what might be about to change.’

Richard Wilson, director at Interactive Investor, said: ‘Constant speculation around pension tax cuts hampers people’s ability to plan and save, and can lead to panicked decision-making.

“A firm commitment to protecting tax relief would provide welcome stability when we should be doing everything we can to encourage more people to save and invest for their future.”

Mark FitzPatrick, director of St James’s Place, said: ‘Incorporating pensions into inheritance tax will have come as a shock to many.

“We need to avoid further tax changes and pension relief, or we risk damaging the reputation of the UK’s best-known and most stable long-term investment vehicle.”