Investment platform AJ Bell has written to Chancellor John Healey calling for a 'Pension Tax Lock' to end speculation over pension tax breaks. The firm warns that uncertainty has already prompted thousands of savers to withdraw retirement funds early.
Withdrawal surge
Analysis of Financial Conduct Authority data shows tax-free cash withdrawals from pensions almost doubled to £18.3 billion in 2024/25, compared with an average of £7.9 billion a year over the previous five tax years. The extra £10 billion was fuelled by rumours that Rachel Reeves could slash the amount people can take tax-free, AJ Bell said.
AJ Bell's call
Michael Summersgill, chief executive of AJ Bell, said: "Pension providers raised alarm bells at both the 2024 and 2025 Budgets, warning that cash was being withdrawn from long-term pension investments and parked in the bank due to rumours around the future of tax-free cash."
"The FCA's own data indicates that at the 2024 Budget alone savers pulled an additional £10 billion. That's money being taken out of long-term investments, which is bad for the economy and bad for people's long-term retirement plans."
He added that uncertainty was encouraging people to make "irreversible decisions based on fear", arguing a Pension Tax Lock would restore confidence without costing the Treasury.
Petition support
A petition backing the proposal attracted more than 20,000 signatures from savers and financial advisers last year. The Government has made no announcement that it plans to reduce pension tax-free cash or pension tax relief, and there has been no confirmation that either measure will feature in this year's Budget. AJ Bell says its call is aimed at preventing speculation from triggering another rush for the exits.
