Fear of pension taxes leads to panic, says Abrdn
A leading fund manager has urged Rachel Reeves to rule out a tax attack on pensions, saying this is ‘no way to nurture a savings culture’.
Abrdn said the speculation caused “panic” among savers who rushed to take advantage of the current lump sum withdrawal rules.
And Abrdn’s new chief executive Jason Windsor urged Labor not to scare away investors with broader policies in next week’s budget.
There is speculation that Reeves will impose national insurance on private sector employers’ pension contributions, but the public sector will save.
Rumors suggest Reeves could change the current policy, which allows pension savers who reach the age of 55 to deduct 25% of the value of their pension pot tax, up to a maximum of £268,275.
The Chancellor is said to be considering cuts of up to £100,000 as she looks to plug a £40 billion budget black hole in public finances.
It comes amid outrage over speculation that Reeves will impose national insurance on private sector employers’ pension contributions but save the public sector.
Noel Butwell, chief executive of Abrdn’s Adviser platform, said a change to the flat rate rule would be futile at a time when the government is trying to boost pension investment.
He said: ‘A tax grab on pensions is no way to foster a savings culture. Speculation is causing panic, especially among those without a financial advisor, who are rushing to take advantage of the tax-free lump sum.”
Butwell said the move would “only serve to undermine confidence in pensions, at a time when more people are having to take responsibility for their financial future.”
“The worst outcome would be that people abandon pensions and long-term savings,” he said.
‘We would encourage the government to clarify now whether any rumored reductions in the tax-free lump sum are being considered, and whether this will protect rights already accrued.’
Abrdn joins rival St James’s Place in warning against the tax attack. And AJ Bell, another investment platform, has also reported the trend of savers rushing to withdraw cash while they can.
It came as Abrdn released a grim trading update that sent its shares down 11%, or 18.4p, to 145.55p. The update revealed that the embattled company had suffered £3.1bn of outflows in the third quarter.
That was far less than the £6.7 billion exodus in the same period last year, but worse than analysts expected. Windsor admitted that performance was ‘not where it needed to be’.
On the budget, he warned Reeves not to be too heavy-handed with “strong-arming” investors’ money.
“Britain must make itself an attractive place for investment,” he said. “You can be damn sure that investments will follow.”
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