Tax raid fears prompted savers to pull about £600 million from their pension pots before the budget, according to one of Britain’s biggest DIY investment platforms, which also criticised “crazy” changes to Isas by the government.
Michael Summersgill, the boss of AJ Bell, said the drawn out period of speculation before the budget on November 26 had fuelled “damaging” fears among the wealth manager’s clients that Rachel Reeves might cut tax-free pension lump sum withdrawals.
Savers are allowed from the age of 55 to draw down 25 per cent of their pensions tax free up to a limit of £268,275.
Concern the chancellor would impose a lower cap led to roughly £600 million of additional withdrawals from pensions in September and October, AJ Bell, which oversees more than £100 billion in total, has estimated. This followed the £300 million of extra pension withdrawals that it also experienced in the same two months a year earlier, when similar worries about a tax grab unnerved its clients.
On both occasions savers’ fears proved unfounded, with the Treasury this year ruling out changes to the lump sum rules in November.
However, the chancellor did press ahead with contentious plans to limit cash Isas allowances for under-65s. The aim is to encourage more people to invest in the stock market, rather than keep their savings in cash, but Summersgill warned “there is nothing positive about the interventions in the Isa market that are being proposed”.
While the overall annual allowance for all Isa products has been kept at £20,000, savers under the age of 65 will only be allowed to put £12,000 a year into cash Isas from April 2027. To deter people from instead hoarding cash in stocks and shares Isas, HM Revenue & Customs will also introduce a charge on interest paid on uninvested cash that is held in these accounts by under-65s. Circumventing the new rules by making transfers from stocks and shares Isas to cash Isas will also be banned.
Michael Summersgill said that the charge on interest in stocks and shares accounts was “just crazy”
AJ BELL
“All of that complexity is a retrograde step as far as I’m concerned,” Summersgill said, adding that the charge on interest in stocks and shares accounts was “just crazy, it’s so unhelpful”.
He said the wider Isa reforms were “the polar opposite to the simplification that we were promised and we were hoping for”.
He added: “How the government’s got this lost along the way, I do not know, but there is nothing positive about the interventions in the Isa market that are being proposed.”
He was speaking as the Manchester-based AJ Bell posted annual results that showed the FTSE 250 company enjoyed a 22 per cent year-on-year rise in pre-tax profits to £137.8 million in the 12 months to the end of September, on revenues that increased by 18 per cent to £317.8 million.
However, despite meeting City expectations, shares in the London-listed business fell 40¼p, or 7.6 per cent, to close at 484½p after AJ Bell said it would increase “business investment to accelerate growth” by more than £15 million over the course of its current financial year.
As a result, it expects to generate a pre-tax profit margin of 39 per cent to 40 per cent for 2026, down from 43.4 per cent in 2025 and 42 per cent the year before.
Summersgill said the extra investment would go on marketing and technology development, including recruiting more engineers.
“There’s a huge growth opportunity and I’m not doing my job properly if we don’t push to invest as hard into that growth opportunity as possible,” he said. “We’ve got the track record to show that we can invest in growth and we can deliver it, so no concerns about any short-term movement in the share price.”
Assets on its main investment platform rose by 19 per cent to a record £103.3 billion over the year, boosted by net inflows of £7.5 billion and a £9.3 billion lift from market movements.