Chancellor Rachel Reeves is facing calls to commit to a pensions “tax lock” to provide certainty for retirement savers.
In a recent letter, investment platform AJ Bell argued that such a commitment would allow workers to invest for retirement “with confidence” in the pension tax system.
The company warned that ongoing speculation about the future of tax-free pension lump sum withdrawals risks undermining trust in the UK’s key long-term savings product and urged the Chancellor to prioritise resolving this uncertainty.
Michael Summersgill, CEO at AJ Bell said: “The Chancellor should resist a short-sighted tax grab from the nation’s long-term savings system.
“Instead, a public commitment to a Pensions Tax Lock, promising not to tinker with the fundamentals of the pension tax system in this parliament, would deliver confidence for savers and signal that this government is serious about supporting long-term prosperity.
“Workers who set money aside decades before retirement, taking responsibility for providing for themselves once they stop working, should not be subject to endless speculation about how their own money may or may not be taxed.”
Research by the investment platform showed rumours of pension tax changes have knocked a third of Britons’ confidence in saving for retirement.
Some 43% of respondents backed the idea of a Pensions Tax Lock, with just 12% saying they were against the idea
More than half (51%) of those aged 55 and over support the idea. The remaining 45% were unsure, which AJ Bell said: “Likely reflects a general lack of engagement with pensions among sections of the population.”
Mr Summersgill continued: “Individuals are expected to spend their entire working life building a retirement pot based on a pension tax pact with the Government. A commitment is made in good faith that they will be rewarded for making sacrifices today to provide for themselves tomorrow.
“Yet in recent months speculation around the future tax treatment of pension contributions, as well as entitlement to 25% tax free withdrawals from a pension in retirement, has been allowed to fester.
“This risks undermining confidence in the UK’s most critical long-term savings vehicle, upon which the retirement security of millions of working households in the country depends.
“A public commitment to a Pensions Tax Lock would ensure savers can plan ahead with confidence under this government and lay down the gauntlet to any successor tempted to raid the nation’s savings.”
Ms Reeves will unveil the Government’s Autumn Budget on Wednesday, October 30.
