Moving_bus

AJ Bell Budget submission calls on Chancellor to deliver tax stability on pensions

10 hours ago
Back to Infocentre

At a glance

  • AJ Bell is urging Chancellor John Healey to commit to pension tax stability ahead of the October Budget.
  • Speculation around Budget 2024 triggered around £10 billion of additional pension withdrawals, disrupting retirement planning and investment.
  • AJ Bell's Pension Tax Lock calls for protection of tax-free cash and pension tax relief for the remainder of this Parliament.
  • AJ Bell also urges the Government to rethink ISA reforms, explore simpler alternatives to pension IHT changes and encourage investment in UK shares.

AJ Bell is urging Chancellor John Healey to commit to pension tax stability ahead of the October Budget, warning that continued uncertainty risks another wave of unnecessary pension withdrawals.

Analysis of FCA data suggests speculation around the 2024 Budget led to around £10 billion of additional tax-free cash withdrawals from pensions. The episode highlights how rumours about changes to pension tax incentives can prompt savers to make major financial decisions based on uncertainty rather than long-term planning.

To prevent a repeat, AJ Bell is renewing its call for a Pension Tax Lock, a Government commitment to maintain the two core pension tax incentives throughout this Parliament: tax-free cash and pension tax relief.

AJ Bell CEO, Michael Summersgill says:

“Savers lit a £10 billion distress flare at the 2024 Budget, which was never extinguished. To avoid another damaging repeat, Chancellor John Healey must side with savers by committing to pension tax stability now.

A pledge of certainty would not cost a penny in new Treasury spending and put an end to rumours that have damaged household finances and the economy.

The Chancellor should be laser-focussed on boosting growth and getting households onto a sound financial footing. Ending a phenomenon that has seen tens of billions taken out of investments and parked in cash should be right in his crosshairs.”

Pension Tax Lock

AJ Bell has consistently campaigned for greater pension tax stability, focused on the two key incentives that underpin long-term retirement saving: tax-free cash and pension tax relief.

Repeated speculation about potential changes, particularly to tax-free cash, undermines confidence in pensions and can lead people to make irreversible decisions based on fear rather than their long-term financial goals. That runs counter to wider efforts to improve retirement outcomes and encourage greater investment in the UK economy.

The Pension Tax Lock calls for the Government to guarantee that it will not reduce either:

  • the amount people can withdraw from their pension tax-free; or
  • the tax relief available on pension contributions.

A parliamentary petition launched by AJ Bell in 2025 attracted more than 20,000 signatures from members of the public and financial advisers, demonstrating strong support for greater certainty around pension tax policy. The petition and the Government’s response can be found here.

FCA data indicate the lack of such a commitment contributed to a £10 billion spike in pension withdrawals ahead of the 2024 Budget.

Tax-free cash withdrawals surge

What else can the Chancellor do to support savers and investors?

1. End damaging speculation on pension tax-free cash.

Alongside tax-free cash, uncertainty over pension tax relief remains a recurring concern ahead of fiscal events. Tax relief reflects the fact that pensions are deferred income and plays an important role in encouraging long-term saving. The Government should commit to protecting both tax relief and tax-free cash.

2. Reconsider pension IHT changes

AJ Bell remains opposed to bringing unused pension funds within inheritance tax from April next year. The proposed rules are unnecessarily complex and risk creating confusion, cost and distress for bereaved families. Simpler alternatives, such as a flat-rate charge on pension funds at death, should be considered instead.

3. Improve, don't replace, the Lifetime ISA

Replacing the Lifetime ISA with a new First Time Buyer ISA would deliver little clear consumer benefit. Reforming the existing Lifetime ISA would be a simpler and more effective approach. If the Government proceeds with introducing the First Time Buyer ISA, it should ensure an appropriate transition for existing customers.

4. Encourage investment in UK shares

Removing stamp duty on UK shares would provide a clear incentive to invest in UK companies. At a minimum, the tax should be removed from UK shares held within ISAs. The cost to the Treasury would be relatively modest while sending a strong signal that Government wants to support long-term investment.

5. Rethink ISA reforms

Proposed changes to non-cash ISAs risk increasing complexity and encouraging more savers to hold cash rather than invest. That would run counter to wider Government objectives to promote investment and growth.

6. Avoid further tax rises on investors

Capital gains tax and investment income allowances have already been significantly reduced. Further changes would weaken incentives to save and invest and should not be pursued.

Rachel Vahey

Rachel Vahey

Head of Public Policy

Rachel is Head of Public Policy helping financial advisers and planners understand the changing pensions and savings environment, as well as how new legislation and regulation affects them and their clients. She’s well known within the pensions and savings industry, and regularly speaks at AJ Bell events, alongside writing content and articles for our website.

More from Rachel Vahey

The information on this page is intended for professional advisers only.

Authorised and regulated by the Financial Conduct Authority.

Financial adviser verification

This area of the website is intended for financial advisers and other financial professionals only. If you are a customer of AJ Bell Investcentre, please click ‘Go to the customer area’ below. 

We will remember your preference, so you should only be asked to select the appropriate website once per device.