Pension firms urge Labour to reconsider tax changes on savings

Pension firms are expressing concerns over potential tax changes being considered by Labour, particularly regarding income tax relief on retirement savings for top-rate taxpayers. Rachel Reeves, the Chancellor, is believed to be contemplating cuts that could impact nearly 9 million workers as more individuals enter the 40 percent tax bracket. Industry leaders warn that such changes could discourage saving for retirement, leading to long-term financial insecurity for many. Mike Ambery from Standard Life emphasized the importance of maintaining a stable pension system, arguing that a flat rate of tax relief could complicate the current structure and negatively affect future retirement savings. Other experts, including Steven Cameron from Aegon, echoed these sentiments, cautioning that reducing tax incentives might deter individuals from saving adequately for their retirement, potentially increasing reliance on state support. Concerns also extend to possible reforms that could limit tax-free lump sums or introduce inheritance tax on pensions, which could further undermine trust in the pension system. Lynda Whitney from Aon highlighted the need for long-term planning, warning that short-term budgetary adjustments could erode public confidence in pensions. Overall, the consensus among pension firms is that any changes should be approached with a long-term perspective to avoid creating an imbalanced system that discourages saving and undermines the financial security of future retirees.