The possibility of the government slashing pension tax reliefs is stoking increasing push-back from advisers and wealth managers.
Media reports have indicated Chancellor Rachel Reeves is considering big cuts to tax-free lump sum withdrawal rights, and bringing pensions into inheritance tax (IHT).
According to Russell Brett, director at advice firm Matthew Douglas, the Budget is shaping up to be “a wealth tax in all but name”.
“Pension tax relief reforms in the Autumn Budget could hit wealthier retirees hardest, slashing higher-rate relief and potentially bringing pensions under inheritance tax—moves that would severely limit the tax-saving benefits many rely on for retirement security,” he said.
As well as individuals, companies could also suffer, according to Brett.
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“Currently, salary sacrifice schemes allow employees to reduce tax liabilities by contributing to corporate pensions,” he said. “However, extending National Insurance to pension contributions could see the government take a larger share from businesses, making this practice more costly for employers.”
While public sector workers have better pensions than most private sector employees they could also be hit by such changes, according to Graham Crossley, NHS pension specialist at Quilter.
“A move like this could stoke fear amongst public sector workers that the government is coming for their pensions,” he said. “The government really needs to start thinking about the consequential impact.
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“Many individuals have earmarked their lump sums to settle mortgages, and their financial plans would be left devastated.
“We could see significant numbers of senior healthcare workers bringing forward their plans to retire to avoid whatever the next attack on their pension could be.
“There’s a risk that it could end up costing more to fix the problems this could create, such as increased waiting lists, compared to the tax take from such a move.”
