{"id":186817,"date":"2025-10-03T05:45:11","date_gmt":"2025-10-03T05:45:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/186817\/"},"modified":"2025-10-03T05:45:11","modified_gmt":"2025-10-03T05:45:11","slug":"rachel-reeves-must-rule-out-pensions-raid-in-the-budget-to-avoid-lump-sum-frenzy-experts-warn","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/186817\/","title":{"rendered":"Rachel Reeves ‘must rule out pensions raid in the Budget to avoid lump-sum frenzy’, experts warn"},"content":{"rendered":"

The Chancellor must rule out a pensions raid in the Budget<\/a> as she faces a re-run of last year’s damaging dash for tax-free cash, it was warned last night.<\/p>\n

Speculation about a new lower cap for the lump-sum has prompted a renewed rush of withdrawals following a spike at the same time last year, experts warn.<\/p>\n

A survey of people with pensions, savings and investments by wealth management firm Rathbones found withdrawing a lump sum from a retirement fund was one of their top regrets among financial decisions made ahead of last year’s Budget.<\/p>\n

Over-55s tempted to take a 25 per cent tax-free lump sum from their pension for fear the limit is slashed in the Budget in November are being warned to treat the decision as ‘irreversible’.<\/p>\n

AJ Bell has urged Rachel Reeves<\/a> to come out against changes now, to discourage people from making hasty decisions that could harm their retirement.<\/p>\n

Rachel Vahey, of the investment platform<\/a>, said: ‘This constant debate about changing pensions tax rules is wearing down people’s trust in the Government and putting them in danger of making knee-jerk decisions.<\/p>\n

‘The Chancellor needs to publicly rule out changes to tax-free cash in order to put an end to speculation. Doing so would alleviate uncertainty and show that the Government is on the side of workers saving for the future.<\/p>\n

‘Failing to provide certainty is irresponsible and punishes workers, who will rightly worry that the government may move the goalposts before they take retirement income.’<\/p>\n

\"Although <\/p>\n

Although Rachel Reeves did not tighten the rules in that Budget, there was an unprecedented 60 per cent surge in tax-free cash pulled from pensions, amounting to \u00a318billion<\/p>\n

Rathbones’ survey found 27 per cent of people regretted withdrawing a lump sum from a pension.<\/p>\n

Taking up to 25 per cent from your pension free of tax is a popular perk at retirement.<\/p>\n

People typically use their lump sum to clear remaining mortgages and other debts, splash out on home renovations, new cars and holidays or even help children onto the property ladder.<\/p>\n

But a string of retirement experts have warned against making rash moves if you don’t have a plan for what you would do with the money.<\/p>\n

Rebecca Williams, of Rathbones, said: ‘The pension tax-free lump sum is one of the best-loved and most well-understood parts of the pensions regime, and it’s understandable that people are nervous about potential changes to the rules.<\/p>\n

‘The ability to withdraw a lump sum free of tax from your pension is hugely beneficial for meeting immediate financial obligations..<\/p>\n

‘But withdrawing without a clear plan can lead to missed growth opportunities and tax exposure.’<\/p>\n

Although Ms Reeves did not tighten the rules in the last Budget, unchecked speculation that she would saw an unprecedented 60 per cent surge in tax-free cash pulled from pensions in the last financial year, amounting to \u00a318billion.<\/p>\n

Outflows are likely to have continued at a similar or even greater rate because of the Government’s plan to levy inheritance tax<\/a> on pensions from April 2027, and ongoing worries a cap might still be imposed.<\/p>\n

\"Sir <\/p>\n

Sir Keir Starmer, leader of the Labour Party with Rachel Reeves Labour MP for Leeds West and Pudsey, Chancellor of the exchequer before her keynote speech to Labour conference<\/p>\n

Pension experts are now issuing a fresh round of alerts in the wake of statements made on tax-free cash cancellation rules by the Financial Conduct Authority (FCA) and HMRC.<\/p>\n

The FCA says there is no ‘right to cancel’ a tax-free cash withdrawal, though pension providers might voluntarily offer this option to customers if they wish.<\/p>\n

And HMRC has confirmed any tax consequences cannot be undone if you do cancel – so the withdrawal will still count towards someone’s tax-free lump sum limit, which is currently \u00a3268,275, even if it is unwound.<\/p>\n

Ms Williams said that, following confirmation from the regulator regarding cancellation rights, taking tax free cash is an ‘irreversible decision’.<\/p>\n

She added: ‘Those thinking they can simply recycle their tax-free cash back into a pension could be in for a nasty shock.<\/p>\n

‘If the move appears pre-planned and contributions spike significantly, HMRC may treat it as an unauthorised payment \u2013 potentially landing you with a tax bill of up to 55 per cent.’<\/p>\n

Did you take a pension lump sum and regret it? Tell us about it by emailing\u00a0editor@thisismoney.co.uk<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"The Chancellor must rule out a pensions raid in the Budget as she faces a re-run of last…\n","protected":false},"author":2,"featured_media":186818,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,100,186,20919,187,4222,184,185,4364],"class_list":{"0":"post-186817","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-dailymail","12":"tag-finance","13":"tag-hmrc","14":"tag-money","15":"tag-moneypensions","16":"tag-personal-finance","17":"tag-personalfinance","18":"tag-rachel-reeves"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/186817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=186817"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/186817\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/186818"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=186817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=186817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=186817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}