Chancellor must calm fears over Budget pensions raid

“Prudent savers now feel like prey.” So said Richard Watkins, a certified financial planner at Continuum, a national firm of financial advisers, in response to the frenzied speculation that chancellor Rachel Reeves intends to hit pensions in her autumn statement, on 26 November.

- By JAMES MOORE

Those who are old enough - and, curses, you have to be 55 or over to qualify – have been withdrawing tax-free lump sums from their pension pots in record numbers. More than £18bn was pulled out in the year to the end of March 2025, compared to £11.25bn in the previous year, according to new figures from the Financial Conduct Authority. The number of people cashing in increased to 211,000 from 163,500.

The fear that the chancellor is planning a raid is an obvious motivator. Estimates of how much she needs to find to stay within her “nonnegotiable” fiscal rules have ranged from £20bn to £40bn. While these are big numbers, and a big problem, it is pin money when compared to the amount of money saved in private pensions - and we're not talking about the public sector here. According to the Office for National Statistics, their combined market value was £1.2 trillion between 31 March and 30 September 2024. File under “tempting target”.

We've been here before. Gordon Brown launched what was dubbed a “smash and grab raid” on pension funds in 1997, with his abolition of their dividend tax credit. This significantly worsened their financial position and ultimately hastened the end of final salary pension schemes, which offer workers a guaranteed income upon retirement, for employees in the private sector. That is the law of unintended consequences at work.