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Savers cash in pensions ahead of Labour government tax raid

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Gary Smith of the wealth adviser Evelyn Partners said: “We are seeing an increasing number of people who are above the lifetime allowance planning to retire before the general election, to lock in.

“We expect Labour to put detailed pension legislation in their manifesto otherwise many people would retire, especially in the NHS, where [they] might exceed the lifetime allowance.

He added: “Ever since the Chancellor surprised with the announcement he was going to abolish the lifetime allowance it has created some opportunity and worry for people whose pensions exceed the lifetime allowance.”

Opinion polling has consistently put Sir Keir Starmer’s opposition ahead of the Conservatives nationally, by double digits for over a year.

However, any changes to pension legislation would require complex legislative changes and make financial planning for retirement fraught with uncertainty.

Savers left in ‘limbo’ over Labour plans

Sir Steve Webb, former pensions minister, now of consultants Lane Clark and Peacock (LCP), said that the move from Labour had left savers in “limbo” without clear guidance on how to prepare for later life.

He said: “The issue is that the Labour party has said it will reverse the abolition of the lifetime allowance but we don’t know when and we don’t know how.

“We also don’t know at what level,” he said, with the new limit potentially being “a million or more”. 

“If you imagine an election in autumn 2024, it would be very difficult to reintroduce it in time for the next year. You would have to do a lot of legislation. It’s not impossible but it would be difficult.

“There’s this kind of limbo,” he said, adding that some savers “probably think there’ll be change in government” and that Labour will bring the cap back, so would “prefer the certainty of acting now”.

He added: “People who have defined pensions might crystallise them and take their tax-free cash now when there isn’t a charge. People like doctors with final salary pensions might just retire.”

Ian Cook of wealth advisers Quilter said he was struggling to advise his clients due to the uncertainty over Labour’s plans.

“We can’t advise clients because we don’t know what Labour is going to do. We’ve been caught in a hiatus for the last 12 months since the announcement of the abolition.”

“It’s enormously unhelpful,” he said, adding that “for some clients that are approaching retirement we are not in a position to say whether to continue to add to their pension because we just don’t know what the rules might look like”.

“If you’re 50 years old now and you have half a million in your pension today you’ll easily exceed the lifetime allowance by 75 years of age under the old rules.”

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