Ahead of Labour’s first budget on Wednesday, October 30th, countless people across the country have already made some major financial decisions based on rumours and expert speculation around what Chancellor Rachel Reeves could be targeting. However, finance moguls are warning people to remain calm and think their decisions through before making any drastic changes.
Many radical changes are expected in the Autumn Statement, particularly around benefits, inheritance tax, capital gains tax and pensions in order to plug the £22billion black hole that the Chancellor inherited from the Conservative government. As a result, 3 major financial moves are being rushed by many people in the hopes of protecting their cash, specifically around their later-life funds while some are even shutting their doors and leaving the country.
One potentially disastrous decision some Brits are making is raiding their pensions and lifetime savings ahead of the announcement. There are widespread concerns that the Chancellor might lower the lump sum amount you can take out of your pension after reaching age 55, which is currently set at £268,275 or 25% of your fund.
Bestinvest told The Telegraph that the number of people withdrawing from their pension in September had doubled compared to last year, primarily attributed to those taking out this lump sum. Jason Hollands, managing director of wealth and accountancy firm Evelyn Partners, warned this panic move will make it liable to other taxes depending on where you store the substantial funds and will disrupt the growth of your pension as a whole. He said: “Pulling out a quarter of your retirement fund in a panic could prove a big mistake that you will come to regret.”
If you reinvest the money back into your pension, Helen Morrissey, head of retirement analysis at investment firm Hargreaves Lansdown, highlighted a different issue you’ll face: “You risk falling foul of recycling rules that could see you clobbered with a tax charge – the potential for poor outcomes is huge.”
Alongside this, many high-net-worth individuals and families are believed to be heading abroad following some other confirmed non-dom policy changes Sir Keir Starmer has announced compounded by the divisive VAT on private school fees the Chancellor is expected to confirm on Wednesday. Research by Henley & Partners claimed 6,000 British millionaires could be living in the EU by the end of the year.
Potential Capital Gains tax increases are also sending some entrepreneurs abroad in search of better opportunities while others have simply shut their doors. The Gazette noted over 1,600 businesses recorded voluntary liquidations in October, double the amount from the same period last year.
James Norton, of fund group Vanguard Europe, warned these last-minute panicked changed could have “painful” consequences because of the level of uncertainty around what the budget actually holds. He urged savers, investors and businesses not to “let speculation cloud their judgement”.