The Treasury has ruled out changes to tax-free pension lump sum amounts in the upcoming Autumn Budget.
Speculation had been mounting that Chancellor Rachel Reeves will cut or cap the tax-free pension lump sum, which currently allows savers to withdraw up to 25% of their pension pot tax-free, up to £268,275.
It had been reported that the government was considering reducing the lump sum allowance to £100,000, with pensions minister Torsten Bell previously supporting a cut to just £40,000.
However, speaking to The Telegraph, officials confirmed that Reeves will leave the 25% tax-free pension lump sum withdrawal limit in place following a spike in pension lump sum enquiries.
Enquiries from clients about taking lump sums from their pensions have jumped 45% over the past month, internal data released by deVere Group shows.
Changes to capital gains tax, inheritance tax thresholds, and other pension reliefs remain on the table as the Chancellor aims to plug an estimated £22bn to £30bn shortfall in the nation's finances.
Research into salary sacrifice, commissioned and published by HMRC earlier this year, has also led to speculation that the government may seek to make savings by abolishing or reforming salary sacrifice for pension contributions.
Treasury insiders are reportedly exploring ways to remove employer NI exemptions on salary sacrifice, a change that could raise up to £17 billion but would reduce the incentive for businesses to offer the benefit. Currently, many employees boost their pension contributions through salary sacrifice, reducing both their own and their employer’s National Insurance bill.
Jamie Jenkins, director of policy at Royal London, commented: "Royal London has been among many across the industry calling for clarity on tax-free cash, so this is good news. This is undoubtedly one of the most popular and best understood features of pensions, and it was becoming a great source of anxiety among savers."
