US EditionRachel Reeves: Will Chancellor Scrap Tax Free Pension Lump Sums - What It May Mean for Retirement Withdrawals
The Chancellor may reduce the tax-free pension lump sum from £268,000 to as low as £40,000, potentially raising £2 billion annually to address a £50 billion public finance shortfall.
- Rachel Reeves is reportedly considering reducing the maximum amount that retirees can withdraw from their pension savings without incurring tax, as part of proposals for this autumn’s Budget.
- This consideration follows a public finance gap estimated above £50bn and proposals shelved before last year's Budget amid speculation over revisiting the cut.
- At present, individuals are allowed to take up to a quarter of their pension savings tax-free, with a maximum limit set at £268,275, a policy put in place following the 2023 removal of the lifetime allowance.
- Experts say reducing the cap to £100,000 or as low as £40,000 could raise around £2bn annually but would mainly affect wealthier retirees, while causing financial planning concerns.
- If implemented, this reform could provide long-term revenue but faces opposition due to unpopularity and transitional complexities, with Reeves ruling out raising income tax or National Insurance.
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Leaning Left2Leaning Right5Center11Last UpdatedBias Distribution61% Center
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61% Center
11%
C 61%
R 28%
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