By Harriet Line, Deputy Political Editor For The NEWSWALLA Published: 23:10 EDT, 9 October 2024 | Updated: 23:42 EDT, 9 October 2024

Rachel Reeves has been warned against raiding pensioners’ tax-free lump sums to try to balance the books.Under current rules, most savers can take 25 per cent of their pension pot tax free once they reach the age of 55, up to a maximum of £268,275.Officials are considering slashing the amount to £100,000 in a bid to raise around £2 billion in revenue at the Budget.But yesterday experts warned the Chancellor against slashing the tax-free lump sum. Sir Steve Webb, a former pensions minister and now a partner at pension consultants LCP, said he did not think it was a sensible way to raise money.  Chancellor Rachel Reeves (pictured at Labour conference last month) has been warned by experts against slashing the tax-free lump sum Treasury officials are considering slashing the amount to £100,000 in a bid to raise around £2 billion (file image)
Your browser does not support iframes.

‘One of the problems obviously is that there are a bunch of people who have planned on the basis that they will be able to take these lump sums, and quite a few people will be over these limits already,’ he told BBC Radio 4’s Today programme.‘So if you brought in a change like this, you would have to have lots of complicated transitional rules and that in turn means you wouldn’t raise very much money for quite a long time.‘So I’m sure it is being looked at, but actually I would be very surprised if it went ahead.’Mike Ambery, of the pension firm Standard Life, told the Daily Telegraph: ‘Operationally, it would be complicated.‘That’s because pension funds are normally written under trust and also you can’t really retrospectively make changes to benefits that people have already built up.‘It could be subject to a legal challenge.’

Share or comment on this article:
Chancellor Rachel Reeves is warned not to slash the 25% tax-free lump sum pensioners can access from their pots when they retire amid fears plan could be subject to a LEGAL challenge