Investors pull money from pension pots in fear of budget tax rises

One of Britain’s biggest DIY wealth managers has warned that some clients are rushing to pull money from their pension pots amid nervousness about a tax grab by the government in the budget.
Michael Summersgill, chief executive of AJ Bell, said there had been “a noticeable change in both customer contributions to pensions and tax-free cash withdrawals” as investors brace themselves for tax changes in the budget on October 30.
Under present rules savers are allowed from the age of 55 to draw down 25 per cent of their pensions tax free up to a limit of £268,275 but there is speculation that Reeves will impose a lower cap on such withdrawals. These rumours have driven an increase in clients taking advantage of their tax-free lump sum pension allowance, a spokesman for the FTSE 250 company said.
Other AJ Bell customers are paying more into their retirement pots amid worries that the government will change pension tax relief on contributions, the spokesman added.
Summersgill insisted that these budget-driven changes in client behaviour “do not have a material impact on AJ Bell’s business performance” but warned: “They represent significant decisions for individual customers.
“We have therefore made representations to the Treasury calling for a commitment to a pension tax lock in the budget, guaranteeing stability in key pension tax legislation for at least this parliament.”
In a further sign of anxiety about the budget, Vanguard, another investment platform, said it had seen a surge in customers making full use of their annual tax-free Isa and self-invested personal pension (Sipp) allowances.
Speculation is mounting about tax rises in what will be the first budget from the Labour government since it came to power in July. Reeves has warned that “difficult decisions” had to be made to fill a hole in the public finances that she claimed was left by the previous Conservative administration. Sir Keir Starmer has said the budget will be painful.
AJ Bell operates a platform used by individual investors to trade shares, invest in funds and manage Sipps and Isas. It was set up in 1995 and Summersgill, who has been with the business since 2007, became its chief executive two years ago, succeeding Andy Bell, the company’s co-founder and biggest shareholder.
A trading update from the company showed that its core platform business attracted 66,000 customers in the year to September 30, taking the division’s client base to 542,000 and driving a 22 per cent increase in assets under administration to an all-time high of £86.5 billion. Assets at the group’s smaller investment management business climbed by 45 per cent to £6.8 billion over the 12 months.
Analysts at Jefferies said the figures showed that AJ Bell had enjoyed a “solid” fourth quarter of its financial year. Shares in the business dipped 5p, or 1 per cent, to 476p.