Top City boss warns of pension raid: St James’s Place chief says tax rises will deter savers
The boss of St James’s Place has warned of a tax raid on pensions that could hamper UK investment.
Mark FitzPatrick’s warning came amid growing evidence of panicked savers withdrawing cash ahead of next week’s budget.
The asset manager’s CEO said tax changes could “lead to harmful unintended consequences” by discouraging people from saving, just as the government hopes more of that money can be used to boost economic growth.
Pension raid: Speculation is growing that Chancellor Rachel Reeves (pictured) will cut the tax-free lump sum that can be withdrawn by savers from their pension pots
That growth is the only way Britain can afford to pay for the investment needed in public sector assets such as schools and hospitals, he argued.
St James’s Place, which manages funds worth £184 billion, has already revealed that budget uncertainty is impacting clients. Rivals like AJ Bell are also seeing customers taking action.
FitzPatrick wrote in the Mail: ‘With the government’s aim to increase investment in UK assets and growth, we must avoid anything that reduces investment further.’
Speculation is mounting that Chancellor Rachel Reeves will cut the tax-free lump sum that savers can withdraw from their pension pots.
When people reach the age of 55, they can withdraw 25 percent of the total tax-free, up to a maximum of £268,275. Rumor has it that Reeves is considering a cut to £100,000.
Such a change would move the goalposts for savers who have carefully set aside money for years with the goal of withdrawing the money at that point to pay off a mortgage, finance their children’s college education or get them into the housing market. to help.
That could deter people from saving for retirement, FitzPatrick warned.
The former chief executive of insurer Prudential said there was ‘a lot of speculation’ about the Budget, adding: ‘This is causing uncertainty and resulting in changes in consumer behaviour, some of which may not be in their long-term interests.
“Once money is withdrawn tax-free, the potential retirement benefits are often lost forever.”
He urged savers to make a “proportionate and sensible response” to any change in their personal finances, rather than a “knee-jerk reaction.”
And FitzPatrick – who replaced Andrew Croft at St James’s Place a year ago – pointed out that Reeves’ potential tax attack comes at a time when UK stock markets are already suffering from damaging cash outflows.
Meanwhile, the government is trying to revive investment in British assets, partly by releasing trillions of pounds of built-up pension savings.
Hands off: St James’s Place boss Mark FitzPatrick warned a tax raid on pensions ‘could lead to damaging unintended consequences’
“This government knows better than anyone that a growing economy is the only way to generate the level of tax revenue needed to invest in the public sector,” FitzPatrick said.
‘It is for this reason that I would like to encourage the Chancellor to carefully navigate the path towards October 30.
“Given the challenging budget situation, I think all of us who are privileged enough to be better off can expect to contribute more if our government asks us to.
But the Chancellor will also know that tax increases should not lead to harmful unintended consequences, such as discouraging those saving for their retirement.”
The government’s own financial advice website, MoneyHelper, has even acknowledged the uncertainty savers face over the 25 per cent tax-free lump sum.
It says: ‘Nothing has been officially announced or confirmed yet, so there is no need to make a decision about your pension quickly now.’
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