The Chancellor has been urged to rule out a punishing tax raid on pensions in the Autumn budget to head off damaging speculation.

Fears are mounting that Rachel Reeves will target retirement pots to raise cash after weak economic growth and higher borrowing costs left a black hole in her plans.

Advisory firm Oxford Economics has warned that some £5billion of the £9.9billion buffer Reeves left herself last week to meet her fiscal rules has already disappeared due to rising bond yields. The Institute for Fiscal Studies (IFS) echoed these concerns, saying there was a ‘good chance’ she will need to raise taxes later this year.

Paul Johnson, IFS director, said: “That risks months of speculation over what those tax rises might be,” identifying “a raid on pensions” as one option.

He noted that even “mere speculation” about such a move “can cause economic harm” – as seen ahead of last year’s Budget, when savers rushed to withdraw cash from their pensions to avoid paying higher taxes.

Speculation is mounting that Reeves may revisit pension tax changes in the Autumn Budget as she struggles to balance the books. Among the measures being considered are cutting tax relief on pension contributions for higher earners and slashing the tax-free lump sum savers can withdraw at age 55 from £268,275 to £100,000.

Previously, she opted against such measures but instead introduced a new death duty by pulling pension pots into inheritance tax for the first time.

Former pensions ministers Sir Steve Webb and Baroness Altmann have urged Reeves to rule out a tax raid on pensions, warning it would discourage retirement savings and leave people worse off in old age.

Sir Steve, a partner at pension consultants LCP, said: “Pensions are a long-term business with money built up over decades and paid out for decades more.

“Savers need stability and certainty to invest and plan with confidence, rather than facing the constant risk of sudden and dramatic changes to the tax regime. It would be hugely helpful if the Chancellor acted now to rule out major changes to pension tax relief.”

Baroness Altmann told This is Money: “Every time there are rumours of pension tax changes, people seem to rush to take money out of their pensions or stop putting as much in.

“The uncertainty drives fear and is not helpful for boosting retirement income security and long-term growth.”

Tom Selby, director of public policy at broker AJ Bell, highlighted how speculation over tax changes last year led to “a significant spike in savers making retirement decisions, such as accessing their tax-free cash, due to fears the Chancellor’s axe could be wielded.”

He urged the government to introduce a Pensions Tax Lock, ruling out changes to tax-free cash or tax relief for at least the rest of this Parliament. “This would allow Reeves to say she is on the side of savers and retirees,” he added.

During her Spring Statement, Reeves ruled out immediate tax hikes and pledged to stick to her strict fiscal rules despite the Office for Budget Responsibility (OBR) projecting that GDP will halve to one per cent in 2025.

At the same time, the OBR warned that any financial headroom could be wiped out if President Donald Trump implements sweeping tariffs on UK imports, forcing Reeves to reconsider tax increases.

Paul Johnson of the IFS explained: “There is a good chance that economic and fiscal forecasts will deteriorate significantly between now and the Autumn Budget. If so, she will need to come back for more, which will likely mean raising taxes even further.”

He warned that uncertainty over tax policy could be damaging: “We might be in for another blockbuster Autumn Budget.

“What the Chancellor has all but guaranteed is another six months of damaging speculation and uncertainty over tax policy. That didn’t go well between last July’s election and October’s Budget. I fear a longer rerun this year.”

No date has been given for the 2025 Autumn Budget, but it is expected to take place in late October or early November.