A lack of clarity ahead of the November Budget is causing panic among Brits.
Rachel Reeves’ Budget will take place in November (Image: Getty)
Brits nearing retirement age are displaying “erratic behaviours” due to a lack of clarity on pension changes in the November Budget. Rachel Reeves is set to deliver her highly-anticipated Budget on November 26, yet those approaching retirement are making changes and withdrawals to their pension pots ahead of the fiscal announcement. According to experts, Brits could be “jeopardising” their savings and “sacrificing future growth” due to the current uncertainty.
Tomm Adams, a partner at the audit, tax and business advisory company Blick Rothenberg, said: “The lack of clarity on the direction the Budget will take on pensions is leading to erratic behaviours among those still in work but under normal retirement age. People in the 55-65-year-old age cohort are potentially jeopardising six-figure pension savings because of fears that the tax-free lump sum will be slashed.”
There is a surge in people withdrawing their 25% lump sum (Image: Getty)
He added: “This along with the fact that inheritance tax will also be levied on unused defined contribution pension pots from April 2027 is leading to a surge in people withdrawing their 25% lump sum.”
Mr Adams warned that withdrawals may be “needless”, which could also be “sacrificing future growth and reducing their ability to save further amounts tax-efficiently”.
“The tax consequences they face can’t be undone once that can of worms is opened,” he said.
The rumoured changes in the November Budget include a tax-free lump sum cap, according to experts, which would reduce the current £268,275 allowance.
Withdrawals increased 35.9% between 2023/24 to 2024/25, according to a report from the FCA. In the six months to September 2024, 99,243 accounts saw money taken out, which is up from 84,132 in the previous six months.
Former pensions minister Steve Webb, now a partner at consultancy LCP, previously said the retirement income data exposed the “fears about reductions in limits on tax free cash” and the impact “uncertainty” around pensions has on the market. “These figures show graphically how uncertainty about pensions and tax can move the market,” he told Citywire New Model Adviser.
Mr Webb said it is “deeply disappointing” that the financial behaviour of Brits is being driven by “uncertainty around public policy”.
ONS figures suggest the average person aged 55 to 64 has £137,800 in private pension savings. You can draw from your pension from age 55 while you can claim your state pension from age 66 – the state pension age is gradually increasing to 67 from next year.
