Rachel Reeves should commit to a pension ‘tax lock’, says DIY investment giant AJ Bell
- Investment platform says fears of a fiscal attack on the budget have hit pension contributions
AJ Bell has called on the Treasury to commit to a ‘pension tax block’ in the autumn budget, claiming to have seen an impact on contributions in recent weeks.
The investment platform told investors on Thursday that there had been a ‘noticeable change in both customer contributions to pensions and tax-free withdrawals’ ahead of the October 30 budget.
Boss Michael Summersgill said AJ had made ‘representations’ to Rachel Reeve’s department in a bid to ensure ‘stability in key pension tax legislation for at least this parliament’.
What is on the cards? Concerns about possible tax changes on pensions are increasing
Under current rules, savers receive pension tax relief at the income tax rate.
Basic rate taxpayers receive a 20 percent exemption, while higher and additional rate taxpayers receive 40 and 45 percent respectively.
Rachel Reeves is expected to consider a proposal from Treasury Department officials for a lump sum 30 percent pension tax credit.
The Treasury could also try to limit people’s right to tax-free money when they access their pension pot.
Another potential target are pension pots, which are excluded from net inheritance tax.
Summersgill said: ‘Pensions are the main vehicle for retirement savings in Britain and customers are unsurprisingly sensitive to changes in their tax treatment.
‘Amid increased press coverage in the run-up to the upcoming Budget, we have seen a noticeable change in both customer contributions to pensions and tax-free withdrawals.
“While these behavioral changes do not have a material impact on AJ Bell’s business performance, they represent important decisions for individual customers.”
Representations: AJ Bell boss Michael Summersgill said the company had made ‘representations’ to the Treasury
In its year-end trading update published on Thursday, AJ Bell revealed that investors using the platform had deposited £6.1 billion into the group over the past year, while customer numbers increased by 14 percent.
AJ Bell saw inflows rise 45 percent year-on-year, taking total platform assets under management to £86.5 billion, above Investec forecasts.
The group said: ‘Gross and net inflows to the platform were significantly higher than last year, driven by continued investment in AJ Bell’s brand and propositions, alongside improved retail investor confidence compared to the previous year .’
Summersgill added: “Our strategy is centered on our dual-channel platform that serves both the advised and (direct-to-consumer) platform markets using a single technology platform and operating model.
‘This maximizes our growth opportunities within the platform market, while allowing us to operate very efficiently.’
Investec analysts said: ‘Given the outperformance of both Quilter and IntegraFin during the quarter, we believe AJ Bell’s in-line performance can be seen as slightly negative.’
AJ Bell stock fell 1.51 percent or 7.25 cents to 473.75 cents on Thursday, after an increase of more than 80 percent in the past year.
DIY INVESTMENT PLATFORMS
A. J. Bell
A. J. Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund trading and investment ideas
interactive investor
interactive investor
Invest for a fixed amount from € 4.99 per month
Sax
Sax
Get £200 back in trading fees
Trade 212
Trade 212
Free trading and no account fees
Affiliate links: If you purchase a product, This is Money may earn a commission. These deals have been chosen by our editors because we believe they are worth highlighting. This does not affect our editorial independence.