Advisers face query surge amid Budget uncertainty

Summary

The wait for Labour’s first Budget following July’s election has felt almost as long as the preceding 14 years since the late Alistair Darling held the post of Chancellor when the party was last in government. Speculation and rumour have clouded any sense of optimism that Reeves and Starmer have tried to inject into the state of the country’s finances in recent weeks, and this has had a direct impact on the decisions savers and investors are making ahead of 30 October.

Adviser survey insights

Almost 100% of advisers have said they’ve seen queries and requests generated off the back of Budget speculation, according to a survey conducted by AJ Bell. But it’s hardly surprising given the high number of stories circulating on various possible reforms, filling the policy vacuum leading up to the Budget.

The fact that a third of clients have requested to take tax-free cash, a decision which in some cases could find people in a worse financial position longer-term, should be concerning to a government which is also committed to harnessing the investment power of UK pension funds to fuel its plans for economic growth.

Ahead of the 30 October Budget, which of the following have generated enquiries from clients or prospective clients concerned about possible tax reforms? Please select all that apply.

Source: AJ Bell*

Among the clients you advise, have any of the following become more common in recent months in anticipation of the possibility of existing tax rules changing at the Budget? Please select all that apply.

Source: AJ Bell*

Calling on the government

Aside from highlighting the importance of financial advice for making measured long-term financial decisions, this lack of clarity does not help savers or the government.

Although recent reports suggest that Reeves has backed away from introducing a flat rate of pensions tax relief, a week and a half still feels a long time to keep people who’ve saved all their lives for a decent standard of living in retirement on the hook.

What’s clear is that the level of uncertainty created ahead of the Budget has real-world consequences. Given one of the key promises made by the new government was to deliver economic stability to Brits, Reeves should use her Budget to nip this issue in the bud by pledging not to make major changes to either pension tax relief or tax-free cash.

This ‘Pensions Tax Lock’ would send a clear signal to savers that the goalposts won’t be moved at a later date and should give people more confidence to take decisions based on their long-term interests, rather than a knee-jerk reaction to wild speculation.

*Based on 131 responses to an online survey of advisers carried out between 30 September and 2 October 2024.