Treasury ministers are in a state of heightened alarm over fears the Chancellor could launch a dramatic raid on pension tax-free cash in the upcoming Autumn Statement, the Daily Mail can reveal.
Senior government figures are panicking that Jeremy Hunt may target the cherished 25% tax-free lump sum allowance in a desperate bid to raise revenue, despite warnings it would spark widespread anger among Conservative voters and backbenchers.
The potential move has sent shockwaves through Whitehall, with experts at the Resolution Foundation think tank urging the Chancellor to consider the controversial measure. Torsten Bell, the Foundation's chief executive, suggested taxing a portion of the lump sum could generate significant funds for the Treasury.
Backbench Rebellion Looms
Tory MPs are already preparing for battle, vowing to fight any attempt to tamper with pension tax relief. One former minister warned such a move would be "political suicide" for a Conservative government, particularly among their core voter base who have responsibly saved for retirement.
The tax-free lump sum, allowing savers to withdraw a quarter of their pension pot without tax deductions, has long been considered one of the most sacred cows of the UK pension system. Any attempt to restrict it would represent the most significant assault on retirement savings in a generation.
Industry Experts Sound Alarm
Financial advisers have reacted with horror to the speculation, warning that altering this fundamental pillar of pension planning would undermine confidence in the entire system. Many middle-class savers have built their retirement strategies around accessing this tax-free cash to pay off mortgages or support children.
"This would be an absolute bombshell for millions of savers," said one wealth manager. "The tax-free cash is often the cornerstone of retirement planning. Tinkering with it now would be devastating for those approaching retirement."
Budget Dilemma for Chancellor
With the Autumn Statement approaching, Mr Hunt faces mounting pressure to find revenue streams for pre-election tax cuts. However, backbench Tories have made clear that raiding pensions would be completely unacceptable, regardless of the fiscal pressures.
One senior backbencher told the Mail: "This would be an absolute red line for dozens of us. We cannot attack people who have done the right thing and saved responsibly all their lives. The Chancellor must look elsewhere."
The Treasury has refused to comment on specific Budget measures, but insiders acknowledge that all options remain on the table as the government seeks to boost its economic credentials before the next general election.
