Rachel Reeves was last night urged to rule out a tax raid on pensions.
The Chancellor is expected to launch a round of tax rises in a Budget this autumn to help fill a black hole in finances as she pours money into the public sector.
That would follow a £40billion tax hike in the last Budget in October.
‘More tax increases are inevitable, not just in the autumn but for years to come,’ said Robert Colvile, director of the Centre for Policy Studies.
It is feared this could involve a raid on retirement pots, including cutting the tax-free lump sum or reliefs on the contributions of higher earners.
Savers can withdraw up to 25 per cent of their pots tax-free at 55 – up to a maximum of £268,275.
Pensions grab: The Chancellor is widely expected to launch a fresh round of tax rises in a Budget this autumn as she pours money into the public sector
Workers also can save up to £60,000 a year tax-free, equating to relief of 20 per cent for basic-rate taxpayers and 40 per cent or 45 per cent for those in the higher and additional income tax brackets.
And experts warned of reductions in the annual allowance or the return of the lifetime allowance while salary sacrifice could also be abolished.
Rumours of an attack on the lump sum proved particularly damaging ahead of Labour’s Budget last autumn as savers withdrew cash from their pension pots.
Investment firm AJ Bell is now calling on the Chancellor to rule out any raid on retirement savings by bringing in a pensions tax lock to provide certainty.
‘This was the Chancellor’s last foray into the limelight before the Budget and attention will now turn to what tax rises might be in the post,’ said Laith Khalaf, head of investment analysis at AJ Bell.
‘Amid growing fiscal pressure, there’s a real risk that pensions tax reform speculation, especially around tax-free cash and tax relief, will return to the headlines.
‘Rather than let uncertainty rattle savers, the Chancellor should introduce a pensions tax lock, ruling out changes to tax-free cash or pension tax relief for the rest of this Parliament.
‘A commitment would offer investors the confidence to plan for the long term and give momentum to the retail investing revolution Rachel Reeves wants.’
Tomm Adams, a partner at Blick Rothenberg, said: ‘Reeves has been suspiciously quiet on the pensions front. But with an expensive funding plan, I’m not alone in asking: “Where’s the money coming from?”
‘Basic arithmetic suggests that autumn tax rises look inevitable. Unfortunately, pensions tax relief is the perfect target.’
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