Chancellor John Healey is being urged to rule out any tax raid on pensions ahead of the upcoming Autumn Budget, as speculation mounts over potential changes to retirement savings incentives. Mr Healey was appointed Chancellor by new Labour Prime Minister Andy Burnham last Monday, taking over from Rachel Reeves at Number 11 Downing Street.
Pressure to protect pension tax breaks
With a pressing need to find funds for increased defence spending and to deliver Mr Burnham's wide-ranging policy agenda, many fear that pension savings could become a target. Pensions experts have written to Mr Healey requesting a guarantee that the tax-free lump sum and other savings incentives "will not be altered in your first Budget."
Currently, savers can withdraw up to 25% of their pension pot tax-free from age 55, capped at £268,275. Any reduction in this allowance would significantly impact those nearing retirement.
Expert warnings against speculation
Michael Summersgill, chief executive of AJ Bell, said: "Such a commitment would stop speculation before it takes hold and demonstrate that this government backs people who do the right thing by setting money aside for their financial future."
Former pensions minister Steve Webb, now a partner at LCP, cautioned: "With a new Prime Minister and a new Chancellor we can expect pre-Budget speculation to be even more feverish than normal. But such speculation can be damaging if it results in people making financial decisions – such as accessing their pension pot early – that they would not otherwise have done."
He added: "There is clear evidence in the run-up to the last Budget of people rushing to take tax-free cash from their pension for fear of a cut which never materialised. By far the best thing the new Chancellor could do for financial stability would be to rule out changes to tax breaks on pensions for the rest of this Parliament."
Former minister warns of early withdrawals
Ros Altmann, another former pensions minister, also urged clarity: "It is really important that the new Chancellor makes clear that the tax free lump sum for pensions will be left alone. Otherwise, more and more people still in their 50s and 60s will take their tax-free cash and reduce the size of their pension and also stop investing the money for their long term lifestyle."
The official date for Prime Minister Burnham's first Autumn Budget has not yet been confirmed, though financial markets and Treasury insiders point to an expected window in October or November 2026. The Chancellor's decision on pensions will be closely watched by savers and industry experts alike.
