AJ Bell has called on the chancellor to commit to a ‘pensions tax lock’ at the upcoming Budget.
In a letter to Rachel Reeves, AJ Bell urged the government to pledge to uphold the key features of the pension tax system to offer savers stability.
By doing this, the government would allow workers to invest for retirement with confidence in the pension tax system, providing certainty to those planning for the future, the firm said.
AJ Bell chief executive Michael Summersgill said: “The chancellor should resist a short-sighted tax grab from the nation’s long-term savings system.
"Instead, a public commitment to a 'pensions tax lock', promising not to tinker with the fundamentals of the pension tax system in this parliament, would deliver confidence for savers and signal that this government is serious about supporting long-term prosperity.”
He added: “Workers who set money aside decades before retirement, taking responsibility for providing for themselves once they stop working, should not be subject to endless speculation about how their own money may or may not be taxed.
“Individuals are expected to spend their entire working life building a retirement pot based on a pension tax pact with the government. A commitment is made in good faith that they will be rewarded for making sacrifices today to provide for themselves tomorrow.
There have been rumours swirling that the chancellor could tinker with the pensions system in this Budget.
There has been speculation regarding the future treatment of tax-free cash which has seen some clients make changes to their pensions ahead of the Budget.
This week AJ Bell reported it had seen a “noticeable change” in both customer contributions to pensions and tax-free cash withdrawals.
Summersgill added: “In recent months speculation around the future tax treatment of pension contributions, as well as entitlement to 25 per cent tax free withdrawals from a pension in retirement, has been allowed to fester.
“This risks undermining confidence in the UK’s most critical long-term savings vehicle, upon which the retirement security of millions of working households in the country depends.
“A public commitment to a pensions tax lock would ensure savers can plan ahead with confidence under this government and lay down the gauntlet to any successor tempted to raid the nation’s savings.”
amy.austin@ft.com
