Speculation over potential changes to pension tax rules has continued to grow ahead of the Autumn Budget, with reports that Chancellor, Rachel Reeves, is set to consider cutting the tax-free pension lump sum. 

Reports from The Telegraph suggested that the idea for the cut, which could raise more than £2bn a year, is set to appear on a list of money-raising ideas that will be presented to Reeves ahead of the Budget. 

Currently, people are able to withdraw up to 25 per cent of their pension pot tax-free at retirement, with a cap of £268,000.

Recent warnings from the International Monetary Fund have stoked speculation that tax cuts are likely, after the organisation warned that the government will need to make "difficult decisions" to rebuild fiscal buffers given the UK's ageing population.

However, The Telegraph suggested that sources from Whitehall have said that the Chancellor is not prioritising pension reforms and that any changes in this area were "unlikely".

This sentiment was echoed by Broadstone head of DC workplace savings, Damon Hopkins, who said that "given the ever-increasing rhetoric around the state of the UK’s finances, there are likely to be many, many rumours in the run up to the Autumn Budget".

“Although it is undoubtedly considered to be low-hanging fruit, the return of rumours around a tax grab on tax-free cash withdrawals is a little surprising given the regularity with which past and present Chancellors have flown kites for this over the past years and the Treasury’s pushback about potential changes to pensions system," he stated.
 
“It is important that savers do not act in haste and later repent...our suggestion would be to act with extreme caution and seek professional, independent advice if you’re considering taking any action in anticipation of any speculated changes.
 
“It is always disappointing to see leaks and rumours around the Budget which only serve to increase anxiety, decrease confidence and often result in unfortunate consequences for the public, especially where the rumours don’t materialise.”
 
Commenting in response to the reports, a HM Treasury spokesperson said: “As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus.

"Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn

“We are committed to keeping taxes for working people as low as possible, which is why at last Autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT.”

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