Chancellor Rachel Reeves has been blasted for “creating fear and uncertainty” amongst Britain’s pensioners ahead of the Budget, as Labour’s plans to reduce tax free lump-sum withdrawals have emerged.
Labour’s squeeze on pensioners shows no sign of abating, after reports claimed that Reeves is “considering” a reduction in the amount pensioners can withdraw from their savings, tax free.
The move is being considered following recommendations by two major think tanks, and hopes to potentially raise “around two billion pounds” for the Treasury.
However, Labour’s prospective move has sparked further criticism of the government following their controversial decision to cut the Winter Fuel Payment for millions of pensioners.
Tom McPhail revealed that pensioners have been ‘calling him for advice’ ahead of the budget
PA / GB News
Speaking to GB News, pensions expert Tom McPhail claimed that Labour has “created this atmosphere of uncertainty and fear” between winning the election and the upcoming Budget.
Hitting out at the government’s “constant narrative of doom mongering”, McPhail explained: “This constant narrative of doom mongering and woe, and these promises of tax rises have understandably undermined individuals and businesses confidence.
“If they make the change, that will result in an increase in income tax – the way that the revenue will be raised is through income tax. So arguably that too would be a breach of their manifesto promise.”
Questioning how the possible change could be implemented, McPhail warned of “more uncertainty” if the cut is implemented slowly, as it will “not raise as much revenue” for the Treasury.
Rachel Reeves and Keir Starmer have faced tough scrutiny for their financial decisions since winning the election in July
PA
McPhail said: “At the moment, it’s the lower of either a quarter of your pension fund or £268,275 that you can withdraw. So this tax free lump-sum being reduced to a maximum of £100,000, is quite a substantial reduction.
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“Would they do it immediately? Would they effectively make it retrospective and undermine the plans of millions of people who are approaching retirement and were expecting to be able to take out more?
“Or would they introduce it gradually, in which case, it would then raise less revenue in the short term because it would take longer to implement.”
Discussing the impact of the Winter Fuel Allowance cut on top of this new prospective cut, McPhail revealed that pensioners have been calling him out of fear of what to do ahead of the Budget.
McPhail said: “It’s caused a lot of disquiet and uncertainty – I’m getting people ringing me up out of the blue, random strangers getting hold of my phone number, saying what should I do? Should I take my money out before the Budget? It’s a really unhealthy environment.”
Tom McPhail warned that the move would ‘undermine the plans of millions of people’ who are approaching retirement
GB News
Offering his advice to those who may be affected by Reeves’s changes, McPhail told GB News: “You’ve got basically got two choices. You either hunker down, sit tight, hope it doesn’t happen in a few weeks time. Or, if you’re really uncomfortable with that, let’s say you need to pay off a mortgage, you need to get the money out, the only other thing you could do is to take the money out ahead of the Budget.
“That would mean dipping into your pension pot now and of course, this will only be relevant to you if they were to introduce that new limit of £100,000. For some people, it’s just not relevant at all.
“But triggering that decision is not consequence free, because you’d be taking money out of your retirement pot where it’s tax exempt, but you then have a big bag of money on the table in front of you.”