Investment group AJ Bell has flagged “noticeable” changes in pension savings amid fears of a possible tax raid in the forthcoming Budget.
The investment platform said it has seen big changes in tax-free cash withdrawals as well as contributions to pensions ahead of the October 30 Budget.
It said it has called on the Treasury to commit to a pension “tax lock” in the Budget to give certainty on pension tax rules in coming years.
Amidst increased press coverage ahead of the upcoming Budget, we have seen a noticeable change in both customer contributions to pensions and tax-free cash withdrawals
AJ Bell chief executive Michael Summersgill
Under current rules, savers can take 25% of their pensions as a tax-free lump sum up to a cap of £268,275 from the age of 55.
But the Treasury could look to lower this cap, with the Fabian Society left-wing think tank recently having recommended dropping the limit to £100,000.
And while savers currently receive tax relief on their pensions at their current tax rate, Chancellor Rachel Reeves is said to be considering a flat rate of pension relief, at 30%.
This would hit higher rate taxpayers particularly hard, given they currently receive relief at 40%.
AJ Bell has, as a result, reportedly seen investors withdrawing money due to concerns over the tax-free lump sum, as well as people contributing more to their pensions amid the tax relief speculation.
Chief executive Michael Summersgill said: “Amidst increased press coverage ahead of the upcoming Budget, we have seen a noticeable change in both customer contributions to pensions and tax-free cash withdrawals.
“Whilst these behavioural changes do not have a material impact on AJ Bell’s business performance, they represent significant decisions for individual customers.
“We have therefore made representations to the Treasury calling for a commitment to a pension tax lock in the Budget, guaranteeing stability in key pension tax legislation for at least this parliament.”
Whilst the upcoming Budget has introduced unhelpful uncertainty, we remain positive about the outlook for AJ Bell and the platform market more broadly
AJ Bell chief executive Michael Summersgill
In spite of the pension worries, AJ Bell reported a 45% jump in cash inflows, to £6.1 billion in the year to September 30.
This helped its total platform assets under management surge 22%, to a record £86.5 billion.
“Whilst the upcoming Budget has introduced unhelpful uncertainty, we remain positive about the outlook for AJ Bell and the platform market more broadly,” Mr Summersgill said.
