Pensioners are being told not to raid their savings in a panic before the Budget in November.
Pensioners are being warned not to raid savings in a panic (Image: Getty)
Pensioners are being warned not to raid their savings in a ‘panic’ before the Budget because it could cause ‘untold damage’ to your retirement plans.
In November, Chancellor Rachel Reeves is set to announce the Autumn Budget, a set of financial plans about taxes and spending which could see various rules changed, allowances cut and thresholds increased or decreased.
Speculation has mounted that Labour could cut National Insurance but increase Income Tax in a move which would increase tax bills for pensioners.
But financial experts are urging households not to ‘panic’ and raid their savings before the Budget because it could harm long-term retirement planning, especially if rules are not changed and you acted based on speculation.
Data from the Financial Conduct Authority showed that UK pension savers withdrew more than £70bn from retirement pots in 2024-25 – an increase of almost 36% on the £52bn taken out the year before. From that, £18.3bn was tax-free cash – a 62% increase on the previous year.
Eamonn Prendergast, a chartered financial advisor at Palantir Financial Planning, said pension pots are “meant to last decades, not be raided in panic. The government must do more to quash rumours early and give clarity.”
Rachel Vahey, of investment platform AJ Bell, said that speculation around pensions last October led to a run on people accessing cash ‘out of fear’ which could have caused ‘untold damage’ to their retirement plans.
She said: “Money accessed from pensions surpassed £70 billion for the first time in the 2024/25 tax year, a 36% increase on the previous year, according to new data from the Financial Conduct Authority. Thanks to pension freedoms, people can take as much as they like from their pensions, but the concern is many aren’t making decisions based on what’s best for them, instead changing their behaviour because they are worried about possible changes to pensions tax incentives from the government.
“Speculation surrounding the fate of pensions tax-free cash ahead of Chancellor Rachel Reeves’ inaugural Budget last October led to an increase in people accessing their cash out of fear they may lose some of it to a change in policy, potentially causing untold damage to their long-term retirement plans.
“Alongside this, the announcement that unused pensions would be subject to inheritance tax from April 2027 has led many to review their overall estate planning, possibly withdrawing pension money faster to spend or gift to loved ones.”
Financial firm Grant Thornton has scoped out what its experts think are the issues facing the Chancellor when she delivers her budget on November 26.
It said: “The Government has pledged not to raise National Insurance, income tax rates (basic, higher and additional), VAT, or the headline rate of corporation tax. Together, these four taxes account for nearly 75% of total tax receipts. These commitments significantly limit the Chancellor’s options. Even small increases to these taxes could generate substantial revenue.
“To raise meaningful revenue without breaking these promises, the Chancellor will need to get creative. However, making small adjustments across multiple taxes risks adding further complexity to an already intricate tax system, with potential trade-offs for growth and investment, which are both critical to reversing the UK’s ever-growing tax burden.”
