Chancellor Rachel Reeves is facing significant criticism for her refusal to commit to a so-called 'pensions tax lock', a move that is sowing uncertainty among millions of savers across the UK.
Ministers and Experts Voice Concerns
Two former pensions ministers have publicly urged the Chancellor to provide clarity, warning that the current ambiguity is causing tangible harm. Steve Webb, the former minister now at consultancy LCP, stated there is clear evidence that speculation before the 2024 and 2025 Budgets led many to access their pensions prematurely, fearing adverse tax changes.
His counterpart, Ros Altmann, echoed these concerns, arguing that constant worry and speculation are actively depleting the value of people's retirement funds. The core issue is Reeves's unwillingness to guarantee that current tax-free withdrawal limits and pension contribution relief will remain unchanged.
Pension Changes on the Horizon
This controversy unfolds against a backdrop of significant changes to the UK pension landscape following the recent Autumn Budget. From April, the full new state pension will rise by 4.8% due to the triple lock mechanism, reaching approximately £12,548 per year, or £241.30 per week. This increase, announced by Work and Pensions Secretary Pat McFadden, will benefit nearly 13 million older people.
Concurrently, the state pension age is scheduled to increase from 66 to 67 between 2026 and 2028. Craig Rickman of Interactive Investor highlighted the financial impact of this shift, noting that for someone born on 31 July 1960 with a state pension age of 30 November 2026, each additional month of waiting equates to around £1,000 in foregone state pension income.
Uncertainty Creates Risk for Savers
The lack of a firm commitment on pension taxation is seen by industry observers as a major source of instability. Without a 'tax lock' assurance, individuals planning their retirement are left in a difficult position, potentially making financial decisions based on fear rather than sound planning.
This situation presents a dual challenge for retirees: navigating the confirmed changes to state pension age and payments, while also contending with the unresolved threat of potential future alterations to pension tax relief and rules. The call from experts is for the Treasury to end the speculation and provide the certainty that pension savers desperately need.
