AJ Bell has joined the growing chorus urging Rachel Reeves to back down from a proposed tax hit on º£½ÇÊÓƵ pensioners, warning that rumours of the government's tax intentions are "hugely damaging" and are causing widespread concern about long-term savings.
The Salford-headquartered FTSE 250 savings and investment platform has reached out to the Chancellor, revealing that an overwhelming 99 per cent of financial advisers have reported an uptick in tax and pension enquiries as the Budget on 30 October looms, with Britons anxious about a possible severe increase in taxes, as reported by .
"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," said chief executive Michael Summersgill in a release.
He added, "People are taking financial decisions in part based on pre-Budget speculation and it chips away at people's confidence in pensions generally."
AJ Bell disclosed that pension contributions by its clients surged nearly 60 per cent in September compared to the previous year, while withdrawals of tax-free cash were roughly a third higher than the average over the preceding 12 months.
Today, the company has demanded "a cast-iron guarantee" from Labour to maintain the current tax relief and tax-free cash entitlements if they come to power, which, according to AJ Bell, would bolster British citizens' confidence to save and invest for their financial futures.
Summersgill has noted, "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," and urged, "A clear promise to deliver tax stability on pensions for at least a decade would provide much needed certainty to savers across the country."
Concern is growing regarding the possibility that Reeves might impose significant taxes on pension savings during her first budget, with the Treasury contemplating actions that could lead to a £24bn tax revenue from pensions as Reeves seeks to address what she describes as a £22bn deficit in the public finances.
Barry O'Dwyer, CEO of Royal London, expressed his concerns in a City AM article over the weekend, emphasising that substantial alterations to pension incentives "risk undermining" the accomplishments of auto-enrolment initiated in the early 2010s by the coalition government, which significantly increased the number of º£½ÇÊÓƵ citizens saving for retirement.
He highlighted that such changes could detrimentally affect the preparation for retirement for future generations and may result in more substantial economic challenges down the line.
Additionally, it has been reported that Reeves has been cautioned by officials that plans to reduce the 40% tax relief for higher earners could have a disproportionate effect on certain professional groups including teachers and nurses.
According to reports by The Times, Treasury officials have informed Reeves that up to a million employees, including some earning relatively modest incomes within the public sector, could be impacted by this policy shift.
For instance, a nurse earning £50,000 annually could be hit with an extra tax bill of up to £1,000 each year.
The Treasury has been approached for a response.
