- Advisers are seeing a surge in queries around pensions taxation and wealth protection ahead of Chancellor Rachel Reeves’ inaugural Budget on 30 October, as almost all advisers (99%) said their clients had approached them with questions
- Uncertainty around what may or may not be announced next week has created a flurry of speculation that has seen rumours of a potential flat rate of pension tax relief and changes to pensions tax-free cash push people into making decisions
- Taking pension tax-free cash (33%) and increasing pension contributions (16%) were reported by advisers to have become more common in response to Budget speculation
- Capital gains tax (CGT) has also been in the spotlight, with over a quarter (27%) of advisers seeing a rise in CGT queries, and a fifth (19%) seeing a corresponding increase in the number of clients looking to sell assets and realise gains before the Budget
- Other wealth protection measures have also become more common, with gifting (10%), moving assets to an ISA (8%) or SIPP (5%), increasing ISA subscriptions (4%) and moving unwrapped assets into investment bonds (4%) also recently popular choices
- AJ Bell is calling on the government to commit to a ‘Pensions Tax Lock’ to avoid further damaging speculation, giving Brits greater confidence to save and invest for their financial future
Rachel Vahey, head of public policy at AJ Bell, comments:
“The wait for Labour’s first Budget following July’s election has felt almost as long as the proceeding 14 years since the late Alistair Darling held the post of chancellor when the party was last in government. Speculation and rumour have clouded any sense of optimism that Reeves and Starmer have tried to inject into the state of the country’s finances in recent weeks, and this has had a direct impact on the decisions savers and investors are making ahead of 30 October.
“Almost 100% of advisers have said they’ve seen queries and requests generated off the back of Budget speculation, according to a survey conducted by AJ Bell. But it’s hardly surprising given the high number of stories circulating on various possible reforms, filling the policy vacuum leading up to the Budget. The fact that a third of clients have requested to take tax-free cash, a decision which in some cases could find people in a worse financial position longer-term, should be concerning to a government who are also committed to harnessing the investment power of UK pension funds to fuel its plans for economic growth.
“Aside from highlighting the importance of financial advice for making measured long-term financial decisions, this lack of clarity does not help savers or the government. Although recent reports suggest that Reeves has backed away from introducing a flat rate of pensions tax relief, a week and a half still feels a long time to keep people who’ve saved all their lives for a decent standard of living in retirement on the hook.
“What’s clear is that the level of uncertainty created ahead of the Budget has real-world consequences. Given one of the key promises made by the new government was to deliver economic stability to Brits, Reeves should use her Budget to nip this issue in the bud by pledging not to make major changes to either pension tax relief or tax-free cash. This ‘Pensions Tax Lock’ would send a clear signal to savers that the goalposts won’t be moved at a later date and should give people more confidence to take decisions based on their long-term interests, rather than a knee-jerk reaction to wild speculation.”
Based on 131 responses to an online survey of advisers carried out between 30 September and 2 October 2024.
Source: AJ Bell
Source: AJ Bell
