Pension tax fears sparking panic, says Abrdn

A leading fund manager has urged Rachel Reeves to rule out a tax raid on pensions, saying it was ‘no way to nurture a culture of saving’. 

Abrdn said the speculation was causing ‘panic’ among savers rushing to take advantage of the current rules on lump sum withdrawals. 

And Abrdn’s new chief executive Jason Windsor, speaking as the company separately published a trading update, urged Labour to avoid putting off investors with wider policies in next week’s Budget. 

Rumours suggest Reeves may change the current policy under which pension savers reaching the age of 55 may take out 25pc of the value of their pension pot tax, up to a maximum of £268,275. 

The Chancellor is said to be considering a cut to £100,000 as she seeks to close a £40bn public finance black hole in the Budget. 

It comes amid outrage over speculation that Reeves will impose national insurance on private sector employer pension contributions, but spare the public sector. 

Noel Butwell, chief executive of Abrdn’s Adviser platform, said a change to the lump sum rule would be unhelpful at a time when the Government was trying to boost pension investment. 

He said: ‘A tax grab on pensions is no way to nurture a culture of saving. Speculation is causing panic, particularly among those without a financial adviser, with a rush to take advantage of the tax-free lump sum.’ 

Butwell said the move ‘would serve only to undermine confidence in pensions at a time when more people need to take responsibility for their financial future’. 

‘The worst outcome would be people opting out of pensions and long-term savings,’ he said. 

‘We would encourage government to clarify now whether rumours to reduce the tax-free lump sum is under consideration, and if it will protect any allowances already built up.’ 

Abrdn joins its rival St James’s Place in warning against the tax raid. And AJ Bell, another investment platform, has also reported the trend of savers racing to pull out cash while they can. 

It came as Abrdn released a grim trading update that sent its shares down 11pc, or 18.4p, to 145.55p. The update revealed that the beleaguered firm suffered £3.1bn of outflows in the third quarter. 

That was far less than the £6.7bn exodus in the same period last year but worse than analysts expected. Windsor admitted performance was ‘not where it needs to be’. 

On the Budget, he warned Reeves not to be too heavy-handed in ‘strong-arming’ money from investors. 

‘The UK needs to make itself an attractive place for investment,’ he said. ‘You can be damn sure investment will follow.’

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