Enquiries from clients about taking lump sums from their pensions have jumped by 45% over the past month, says deVere Group, amid widespread speculation that the Chancellor will use the Autumn Budget to make changes to pensions.
Rumours in recent weeks have suggested that Rachel Reeves could cut or cap the tax-free pension lump sum, which currently allows savers to withdraw up to 25% of their pension pot tax-free up to £268,275. There have been suggestions that Reeves could lower this limit to £100,000 or as little as £40,000.
Nigel Green, ceo of deVere Group, said: “There’s a growing sense of urgency among pension savers who fear that one of the most valuable and popular tax benefits in the UK could soon be scaled back.
“A 45% rise in enquiries in just one month underscores how seriously people are taking the speculation.”
Green said many clients are asking whether they should act now to secure their existing entitlement before the Budget or wait for clarity.
“The answer depends on individual circumstances, but what is clear is that confidence in the long-term stability of the UK pension system is being tested,” he said.
Green warned that any reform to the tax-free lump sum would have significant behavioural and economic consequences. He said a cut to the allowance could trigger a rush of withdrawals ahead of the Budget, particularly among those approaching retirement.
He also said changes could erode trust in pension policy consistency.
“People plan for decades on the basis of the rules in place. If the Government moves the goalposts, it undermines the incentive to save for retirement and risks pushing people towards less efficient or riskier investment routes.”
Green said the surge in client activity shows that financial planning is now being driven by policy risk as much as market risk.
He added: “The speculation alone has already changed behaviour. Even if no change is ultimately made, the mere possibility of it has caused many to reassess their retirement strategies. And that’s a warning signal for policymakers.
“Clear communication from the Treasury would go a long way to stabilising sentiment and restoring confidence.”
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