‘Hugely damaging’: AJ Bell warns Reeves against pension tax raid
AJ Bell has added to mounting calls for Rachel Reeves to retreat from a raid on UK pensioners today as it warned rumours of the government’s tax plans were “hugely damaging” and “making people fearful about long-term saving”.
In a call to the Chancellor, the FTSE 250 savings and investment platform, which is headquartered in Salford, said that some 99 per cent of financial advisers had seen tax and pension queries increase in the run up to Budget on 30 October as Brits fret over a potentially punitive hike in taxes.
“Constant rumour and speculation about the future of retirement tax incentives – primarily the tax treatment of pension contributions and tax-free cash on retirement – are hugely damaging,” chief executive Michael Summersgill said in a statement.
“People are taking financial decisions in part based on pre-Budget speculation and it chips away at people’s confidence in pensions generally.”
Pension contributions by its customers were up almost 60 per cent in September on last year, AJ Bell said, while the number of people accessing their tax-free cash was around a third higher than the average over the past 12 months.
The firm has today called for “a cast-iron guarantee” from Labour not to change tax relief or tax-free cash entitlements while in government, which it said would give Brits “greater confidence to save and invest for their financial future”.
“The chancellor has an opportunity to nip this in the bud by using her inaugural Budget to publicly commit to a pact on pension taxation,” Summersgill added.
“A clear promise to deliver tax stability on pensions for at least a decade would provide much needed certainty to savers across the country.”
The comments point to mounting concern over the scale of a tax raid on pension pots by Reeves at her first budget.
It was reported last week that No11 was mulling what could amount to a £24bn pension tax bonanza as the Chancellor tried to fill what she calls the £22bn black hole in the public finances.
Writing in CityAM over the weekend, the chief executive of Royal London, Barry O’Dwyer, similarly warned that major changes to pension incentives “risk undermining” the success of auto-enrolment in the early 2010s under the coalition government, which has dramatically pushed up the number of Brits saving for retirement.
“That could prove to be a major setback in preparing future generations for retirement, and most likely lead to bigger economic challenges in the years ahead,” he wrote.
Reeves is also said to have been warned by officials that a scheme to reduce the 40 per cent tax relief on higher earners could disproportionately impact teachers and nurses.
Treasury officials told Reeves up to a million workers, some on relatively modest incomes, employed by the state would be affected by the policy change, the Times reported.
A nurse earning £50,000 a year could face an additional tax bill of up to £1,000 annually, for example.
The Treasury has been contacted for comment.