Pension warning over tax changes as millions told to 'avoid rash decisions' (original) (raw)

Millions of people across the UK who are worried about new restrictions on their private pensions have been urged not to make any hasty decisions before the Chancellor's Budget on October 30. In recent weeks, speculation that Rachel Reeves will announce changes to pension rules has intensified and left many savers concerned.

Some may be thinking of taking their 25 per cent tax-free lump sum as soon as possible or even emptying their pension pot completely. Many fear that tightening up the rules will mean they are penalised for trying to save as much as they can to support them in retirement - while having their cash available for costly emergencies.

The Retirement Living Standards website says that a single person needs £14,400 a year and a couple £22,400 just to have a minimum lifestyle with one UK-based, one-week holiday and no car. For a moderate lifestyle, with a car and two weeks abroad in the Mediterranean, a single person would need £31,300 a year and a couple would need £43,100. Meanwhile, a comfortable lifestyle would require £43,100 a year if you're single and £59,000 for a couple which would allow changing the car every five years and having one overseas holiday and several weekend breaks.

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Around 45.2 million people aged 18 or over in the UK have a private pension, and the average value is £50,000. The minimum age at which you can start taking money from your private pension is currently 55, but it will increase to 57 from April 2028. Rumours over possible restrictions have left many alarmed but experts say any changes to current arrangements would be very risky.

Lily Megson, Policy Director at My Pension Expert, said: "As we approach the first Labour Budget for over 14 years, speculation around potential changes to pension tax rules has intensified. With talk of a fiscal black hole, Chancellor Rachel Reeves will likely present some drastic changes to balance the books, with rumours that the tax-free lump sum and tax relief are in her sights. Naturally, this has left some pension planners feeling concerned.

"However, it's important that savers take this as what it currently is – speculation. The resurfacing of old comments from Reeves supporting a flat rate of tax relief – which the government has since distanced itself from – has fuelled much of these concerns, but any changes to tax relief would be deeply unpopular. Tax relief is a major incentive for retirement saving, and with under-saving already a significant issue, such a move would be bold and potentially very risky."

Ms Megson added: "Rumours have also caused an increase in savers considering withdrawing their tax-free cash now to ‘get ahead’ of possible changes. But people need to understand that nothing has been confirmed, and any changes announced in the Budget are unlikely to take effect until the next financial year at the earliest, giving them ample time to plan accordingly.

"Ultimately, savers should avoid making rash decisions that could harm their long-term retirement plans. Until we have concrete details from the Budget, the best course of action is to stay calm and make well-informed, considered choices."

Private and workplace pension savings have become an increasing focus for workers in recent years as the value of the State Pension sits below even minimum retirement standards. In April 2025, the full amount of the New State Pension is set to rise from £11,502.40 to £11,962.60 a year. Meanwhile, someone on the full rate of the old, pre-2016 Basic State Pension will see a rise from £8,814 to £9,167 per year.

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