The £268,275 tax-free lump sum withdrawal from pension pots has survived Rachel Reeves’ first Budget, to the relief of many pension savers.
There had been speculation that the Chancellor would slash the tax-free rate to as little as £100,000 as part of an attempt to raise billions of pounds in additional tax revenue.
It was not all good news on pensions though, with pension pots being passed on to loved ones being brought into inheritance tax scope by the government.
Steven Cameron, pensions director at Aegon, said: “Those who’ve built up substantial pension pots will be relieved that the Chancellor didn’t introduce new limits on tax-free lump sums. Currently, individuals can typically take 25% of their pension pot at retirement as a tax-free lump sum, subject to a recently introduced maximum of £268,275.
See also: Autumn Budget 2024: Capital gains tax hiked to 24%
“Many individuals will have planned their retirement finances on the assumption they could take 25% on their full fund as a tax-free lump sum. Being stopped from doing so would have caused a major outcry,” he continued.
“When saving in a pension, your funds can’t be accessed until age 55, increasing to 57 in 2028. People deserve tax incentives in return for putting away money today to provide for a retirement which could be decades away.
“Restricting a much-loved tax perk might have made pension savings look less attractive at a time when many – if not most – people are not saving enough for a comfortable retirement.”
