Labour is facing a pensions exodus as people scramble to pull out money ahead of the Budget amid tax fears. The government has been warned that pensioners are pulling out money early due to potential changes to taxes in the Autumn Budget.
Wealth manager Quilter and investment platforms AJ Bell and Hargreaves Lansdown are among the firms that warned there is too much “uncertainty” over changes that could soon take place.
They highlighted that as a result, more and more people are considering withdrawing from their pension pots over predictions that pension tax relief could soon be cut back. Steven Levin, chief executive of Quilter, which manages £113bn, issued a letter to the Treasury earlier this week in which it noted that the wealth manager was “experiencing a significant increase in calls from customers wanting to adjust their retirement plans.”
The Financial Times reports that Mr Levin added that the cause was due to ” the recent Budget warning, which indicated ‘painful’ changes to taxation but left a gap in information other than ruling out changes to major taxes”.
The letter also stated: “The knock-on uncertainty around changes to pension tax reliefs, tax-free cash and possible amendments to pension contributions is causing anxiety and confusion for those trying to plan their financial futures.”
Other investment experts also issued a warning over potential tax issues coming in this month’s budget, with the government frequently stressing that there is a £22bn hole in public finances. Tom Selby, public policy director at AJ Bell, told the newspaper: “Once you’ve taken your tax-free cash you can’t put the toothpaste back in the tube.” He warned that people may actually end up worse off if they do this and discover their worst fears have not been realised.
And he called for a ‘pact’ on pension taxation amid doubts of what may come down the line for pensioners.
Meanwhile, Jason Hollands, managing director at Evelyn Partners, told the FT pension tax would be one “of the main areas causing anxiety.”
He added: “Our financial planners are receiving calls from anxious clients, many of whom are at risk of making hasty adjustments to their retirement plans without fully understanding the potential consequences.”
Quilter’s Levin told the Financial Times that “driving knee-jerk decisions” were being made by people unsure of what might happen to their pensions. He said: “Our financial planners are receiving calls from anxious clients, many of whom are at risk of making hasty adjustments to their retirement plans without fully understanding the potential consequences.”
The Treasury declined to comment. Meanwhile, today a rising star in the new intake of Labour MPs has defended the Chancellor’s decision to rule out a wealth tax against the richest.
Torsten Bell, a former Treasury official and chief executive of the economic think tank Resolution Foundation, said: “On the tax side it is very fashionable on the left to say ‘let’s just have a wealth tax’,” he said.
“For some of us who have spent 20 years working on tax policy, I think that is something that is exciting for them to write in books and not very useful in terms of helping govern the country. There are two reasons why that is.
“The short reason why that doesn’t work in the UK is two words, Jeff Bezos. He does not live in the UK.
“And, yes, we do have some very rich people. But our wealth is nowhere near … we don’t have the globally rich people that the US, particularly, has lots of.
“You will have a brand new wealth tax and you are not going to bring in really significant revenues in the UK.
“Secondly, doing it is really hard. I am fed up of people saying Government should do this then not getting remotely interested in the hard job of getting homes built… taxes that actually raise money.”
