Pension saving is usually seen as a sensible move for those planning towards their retirement, and to incentivise Britons to do so, it comes with a number of perks. One of these is the idea of tax-free cash. It means savers can take up to 25 percent of the amount built up in any pension as a tax-free lump sum. This lump sum does not affect an individual’s Personal Allowance either, making it even more of a benefit.
“This would deliver an unwelcome double for the Chancellor of unpopularity and complexity. What’s more, any savings to the Exchequer would potentially take years to materialise.”
In the past, a cut to the tax-free lump sum has been described as a fairly “simple” change for the Chancellor to take.
While it is not yet clear if this will come to fruition, if it were to happen it could mark a major change for how pensions are viewed.
Recently, Institute for Fiscal Studies deputy director, Carl Emmerson, also touched upon the idea of limiting the amount of pension that can be taken tax-free.
Previously, Christine Ross, Head of Private Office – North at Handlesbanken Wealth Management, told Express.co.uk: “Probably the greatest pre-budget pension hype relates to a potential change to the pension commencement lump sum (PCLS), otherwise known as tax free cash.
“I would be very surprised if there were to be a change to the PCLS that would be imposed retrospectively although I think it is highly possible that PCLS could be limited to benefits already earned.”
But when speaking, Ms Ross said there is little action which can be taken in advance of such a change, and therefore people should not rush to withdraw tax-free cash prior to the Budget.
Indeed, if changes were to be announced, they may not happen immediately, giving Britons some time to consider their options.
In this sense, some may benefit from speaking to a financial adviser, as is usually encouraged when it comes to pensions – which can get quite complicated.
Furthermore, the Government-backed service PensionWise is also available, offering free, impartial guidance about defined contribution pension options.