The government has refused to rule out introducing key changes to pension policy at the Budget, as thousands of savers express concern over a lack of time to prepare.
Nearly 20,000 people have signed a petition to introduce a “pension tax lock” ahead of the fiscal event on 26 November, urging the chancellor Rachel Reeves to commit to two key pension pledges.
These are to keep in place the tax-free lump sum people can withdraw from their pension, and not to lower the tax relief currently applicable to pension contributions.
Responding to the petition at 10,000 signatures, the government said it is “committed to ensuring pensioners have security in retirement”, pointing to the newly launched Pensions Commission, which will “look at what is required to ensure the system is strong, fair and sustainable”.
The revived commission, which last met in 2006, is expected to provide recommendations on how to boost retirement income in 2027.
The government’s response states that it “wishes to encourage pension saving, to help ensure that people have an income, or funds on which they can draw, throughout retirement”.
It adds: “With regard to the proposed ‘pension tax lock’, the government does not comment on proposed tax changes or tax-related speculation ahead of Budgets.”
Related: Is Reeves mounting a pensions tax raid at the Budget?
As Ms Reeves’s crunch second Budget fast approaches, researchers from the Institute for Fiscal Studies (IFS) have found that the chancellor will need to find at least £22bn to make up a shortfall in the government’s finances, as rising borrowing costs and weak growth forecasts drastically reduce her room for manoeuvre.
However, Labour’s continued commitment not to raise the headline rate on any of the three largest tax bases – income tax, VAT or national insurance contributions – makes matters more difficult for the Treasury. With these avenues closed off, it is more likely that the chancellor will opt for a selection of more varied tax tweaks.
Economists have speculated that this could put pensions on the table, as an option more likely to deliver on ministers’ pledges to focus the tax burden on those with higher wealth.
The “pension tax lock” petition, launched by investment platform AJ Bell, calls for an “end” to speculation around every Budget on changes to pensions. This “erodes confidence in long-term saving”, it claims, “and can all too often lead to people making poor, sometimes irreversible, financial decisions”.
Reacting to the the government’s response, Tom Selby, director of public policy at AJ Bell, said: “Sidestepping calls for stability in pension tax rules ahead of the Budget gives the government an easy get-out clause for now, although it means savers are subjected to at least another five weeks of uncertainty.
“The government’s response suggests it could look to the Pensions Commission for an opinion on the future of pension taxation, meaning immediate reform at this Budget should be off the table.
“If this is the intention, as an absolute bare minimum, the chancellor Rachel Reeves should pledge not to make any changes to the pension tax system at least until the commission reports, removing uncertainty in the immediate term [and] allowing time for the entire pension landscape to be considered in the round, and for the implications of any changes to be carefully thought through.”
In UK’s interest to ‘protect’ collapsed China spying case documents – minister
Stormont Education Minister Paul Givan under fire over visit to Israel
British tourists locked down in hotels as 185mph Hurricane Melissa hits Jamaica
Scottish minister criticises ‘lack of engagement’ on asylum seeker barracks plan
Plans to end asylum hotels ‘won’t save any money’
Income tax rise now needed to plug extra £20bn in black hole, economists warn Reeves
