Experts say that Chancellor Rachel Reeves should dispel rumours about the way pensions are taxed to avoid people acting on rumours and potentially making life-changing decisions that could be damaging in future.
Nimesh Shah, CEO at Blick Rothenberg, said: “I personally haven’t experienced such a wave of enquiries on this subject since 2019, when there was serious concern around a Corbyn/McDonnell government.
“In one very extreme example, I have a case where the person is considering taking everything out of their pension before the Budget.
“There is a complete lack of leadership from the Chancellor in relation to these rumours – she could easily close these down. I think there needs to be stronger leadership from the Government and categorically rule this out.”
It is a popular option for retirees looking to pay off mortgages, support children financially or invest in inheritance tax-efficient vehicles.
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Lisa Picardo, chief business officer UK at PensionBee, said: “The example of individuals rushing to withdraw lump sums before the 2024 Budget serves as a cautionary tale of how speculation, confusion and urgency can lead to decisions that don’t serve an individual’s best interest.
Rachel Vahey, head of public policy at AJ Bell, added: “With the Budget fast approaching, the rumour mill is going into overdrive over whether there will be changes to pensions tax incentives from November.
AJ Bell is calling on the Government to commit to a pension tax lock, vowing not to change the rules on pension tax relief or tax-free cash for at least the remainder of this parliament.
Some firms allowed those who took their lump sum, and regretted it in the light of the lack of policy change, to put their money back into their pension and undo their decision. They were able to do this under rules that allow cancellation of certain actions within 30 days of it being taken.
Statements from the taxman and the FCA this week suggest many decisions to take out a pension will not be covered by the 30-day rules, and that some individuals could be treated as having used up some of their lifetime lump sum limit of £268,275, even if the money has gone back into their pension.
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